Strides Arcolab hives off research, R&D divisions

Strides Arcolab Ltd has joined the likes of leading drug firms such as Dr Reddy’s, Piramal Healthcare and Glenmark by hiving off its research and speciality divisions to de-risk its core businesses.

The company today announced a corporate reorganisation that will see its businesses being split into three entities – speciality pharmaceuticals, pharmaceuticals and research and development.

The process will involve its specialty pharma business and research and development becoming wholly-owned subsidiaries, Strides Specialities Pvt Ltd and Strides Technology and Research Pvt Ltd, respectively. The pharma business will continue under the parent company.

Strides had annual revenues of Rs 1,377 crore in 2008, the bulk of which came from its pharma business. The company share price rose 6.9 per cent to close at Rs 105.6 on the BSE today.

The reorganisation will see four of its Indian subsidiaries being merged with the parent company. “Strides has about 40 subsidiaries globally. The restructuring will see several of these being merged into the three major entities. This will allow us to go for strategic sourcing and realignment at the international level for optimisation of our capabilities,” said a company official.

“The reorganisation is a major step to attain greater efficiency and accountable, customer-focused business units, while still retaining the aggressive and entreprenerual spirit of Strides. Both our business units will be backed by a strong and independent R&D function,” said Group CEO Arun Kumar.

The R&D entity of Strides expects to generate its own revenues through in-licensing and out-licensing deals, company officials said. “We have a huge pipeline of research products. Hiving off our R&D business can unlock that value,” they added.

In a separate development, the Strides board today decided to issue 6.2 million preferential shares worth Rs 60 crore in current market value to meet ongoing corporate expenses. Company officials described the fund raising plan as ‘routine’.