Strides Pharma Science

Some of the snippets from latest conference call while the demerger of CDMO business is detailed.

• More confidence to re-affirm the EBITA guidance for FY24 at 700-750 CR (Market cap ~ 6 times)
• Reconfirmed the debt reduction target of 3 times EBITA
• Soft Gelatin business included in OneSource, they are amongst the top seven or eight Rx only soft gelatin players worldwide; complex injectables are erstwhile B2B business of Agila to be part of OneSource; Biologics and Drug Device combination also part of OneSource
• “Ever since we announced our intentions to be at CDMO, we have started onboarding several
  customers in our business”
• “post our FDA approval we now have 15 unique customers in our biologics business”
• “In the last five months, we have contracted more master services agreements than we did in four years; And we have now started commercial sales from FDA approved site”
• Strides shareholders will get 44% of the economics of OneSource; Roughly Rs. 364 per share of Strides where about 1,600 Crs. is invested.
• For OneSource, Softgel and Injectable business have delivered about 30% EBITA
• About 300 Cr. debt to be pushed to OneSource that will leave Strides at about 2.5 time debt to EBITA
• For FY25, Demerged Strides to have 4,000 Cr revenue & 700-750 Cr EBITA
• “I can also tell you that we have a very strong H2 across the company, including this platform”
• I can also assure you that both the injectables business and the soft gelatin book is quite full for the next year. So, we don’t have to scramble for any new business to meet our guidance of USD180 to USD200 million (i.e.~1,500 – 1,600 Cr)
• About CDMO, We have now about 14 customers in our GLP-1 programs, for many of the first to file in the U.S and various other markets, we are there preferred or sometimes sole supplier.
• only two unique companies that offer soft gelatin capsules, biologics, injectables and drug device combinations are Thermo Fisher(trading at about 5 time revenue) and Catalent(trading at 8 times revenue)
• Neeraj, CEO Designate OneSource – “I’m hugely excited to lead India’s first specialty pharma CDMO”
• OneSource will have as its growth engine two of the fastest growing trailblazers, One is biologicals and the second as GLP-1. adding to these are complex injectables and high-tech soft-gels
• The individual parts of proposed OneSource expected to deliver $140-150 Mn. revenue in current year FY24; Thanks to some of the recently signed contracts which we have, including actual customer forecasts and a very strong, large funnel we see this business growing anywhere between 20% to 25% year-on-year over the next many years.
• We have a significant number of customers already in place for our GLPs with almost $350 million forecast of sales coming from them just for their first three years. EBITA margin range 25-35%.
• We have no challenges in seeing this business doubling from the $200 million that we will do in FY ’25, when that scheme is completed in less than three to four years and all of that will come from or a lot of it will come from the growth on the biologics division and that’s why we also upped our EBITDA to 35% at that time because the opex leverage is significantly higher in the biologics business.
• There will be INR200 crores, INR300 crores of capital even in its first phase of growth, when we think we will be able to double our revenues from $200m to $400m; Quite a good amount of capacity already exists for expansion without significant capex