CDMO Assets: Strides Pharma to spin off CDMO assets to form a separate unit

Strides Pharma on Monday said it will demerge its contract development and manufacturing services (CDMO) assets into associate company Stelis Biopharma to form an independent specialty pharma company spanning biologics, complex injectables and soft gelatin capsules. The new company will be called OneSource, and it is expected to be listed in the next 12-15 months, according to Strides Pharma.

As per the restructuring arrangement, shareholders of Strides Pharma will receive one share of OneSource for every two shares they hold. Strides’ shareholders will thus participate in value discovery by holding 44% stake in OneSource, which is valued at around ₹3,343 crore.

The demerged assets include the soft gelatin business of Strides Pharma with annual revenues of $65 million and SteriScience, a promoter group company that makes sterile injectables and has revenues of $60 million.

The demerger will reduce Strides Pharma’s debt by $35 million. “The shareholders of Strides will get a benefit of ₹364 per share,” Arun Kumar, executive chairperson and managing director told ET. He said the restructuring will enable efficient capital allocation and focused leadership to drive growth in both entities.

Strides said despite the demerger, the firm is on track to achieve its outlook of ₹700-750 crore Ebitda for this financial year. OneSource will have revenues of $145 million, with a net debt of $115 million and 25% Ebitda in FY24, as per Strides.

Stelis has been battling high debt and cash flow issues. Unsold stocks of Sputnik Covid-19 vaccines, which were produced through a pact with Russia’s Russian Direct Investment Fund (RDIF), has caused large losses. The company said it has already initiated an arbitration process against RDIF. Sputnik vaccine found few takers in India amid issues over availability of the second dose, the Russia-Ukraine conflict and subsequent Western sanctions against Russia and the RDIF.