HQ Team
February 1, 2030: Stelis Biopharma, a division of India’s Strides Pharma Science, will become a full-fledged contract development and manufacturing firm and may list “near-term.”
“This is something that we have been guiding the street for several quarters as we have taken several prudent provisioning in Stelis as we move from a product company to a pure play CDMO,” Arun Kumar, executive chairperson of Strides Pharma, said.
“On overall debt reduction, we have now reduced debt by close to about six billion, and we will continue to focus on reducing debt as we complete certain actions that we are focused on, which will not have any impact on our revenues or our growth strategies,” he said during an earnings call.
“We have appointed a global banker to evaluate the strategic options, including a listing option for Stelis in the near term.”
COVID-19 vaccine facility fiasco
Stelis, Bengaluru-based, had invested more than seven billion rupees to set up a facility for making Russia’s COVID-19 vaccine, Sputnik Light.
In a letter to the Indian Prime Minister in May last year, the company urged the government to procure 25 million vials or to supply to other nations under the Vaccine Friendship programme.
Stocks of the single-dose vaccine piled up due to the Russia-Uraine conflict. Despite COVID-19-induced restrictions, the company had started manufacturing the medicines, according to the letter. The company also received government approvals to produce and export the jabs.
“Stelis is an investment in our biopharmaceuticals division that we have invested for several years during COVID,” Kumar said.
“We expanded the biopharmaceuticals business to set up a new multi-model facility which could make, amongst other things, vaccines and got into this contract with the Russian direct investment fund, which is the sovereign fund of Russia.
‘Contracts not executed’
“We received all permissions to export the product, but given the challenges around the geopolitical situation, our take-or-pay contracts have not been executed,” Kumar said.
Stelis has received an extension of inventory timing until the end of June and has made prudent provisions in all COVID-19-related inventories as it now becomes a pure-play CDMO company, he said.
Stelis has some intellectual property value of close to about INR one billion on products it intends not to develop. The parent company believes that the value of Stelis comes from its pure-based contract development and manufacturing strategy.
Stelis have made commitments of 6.50 billion rupees of capital to ensure that it meets all operational losses, debt obligations and COVID-related provisions.
Debt at Stelis will fall to seven billion by the end of March, and the company will have a CDMO order book for the next year of over three billion rupees.
It “gives us the confidence to guide the market that Stelis will be EBITDA positive from next year. As you know, this is a high 90% gross margin business that we operate,” Kumar said.
New customers
“The shift to the CDMO business is playing out extremely well. We have added several new customers, and we are benefiting significantly from the shortages of certain capacities that are still challenging the industry. We are very happy with the new customer list we are onboarding,” he said.
After the total debt of 6.5 billion rupees is paid, the stake of Strides Pharma will come down to 31.5% from 33%.
Strides provide affordable generic medicines in more than 100 countries, supported by its global manufacturing footprint spanning eight facilities spread across four continents, including multiple sites with Stringent Regulatory Authority approvals such as USFDA, EMA and others.
