Strides hits big with pfizer deal

Cash flow speeds up from the licensing pact

Strides Arcolab, a Rs 1,500 crore publicly-held pharma firm based in Bangalore, is reaping the benefits of its outsourcing deal with Pfizer. While the financial terms have not been disclosed, the quantum of the deal is visible from Strides paying in cash for its recent acquisitions. Strides has managed to payout nearly a third of the Rs 880 crore which it has to pay for its recent acquisitions.

“This indicates pretty good cash flow from the licensing deal with Pfizer,” noted an analyst. In March 2010, Strides bought a 50 per cent stake owned by South African generics drug maker Aspen Pharmaceuticals for $117 million (around Rs 531 crore) and also acquired Aspen’s unit in Brazil for $75 million, taking the cost of its acquisition to $192 million.

It is understood that around $67 million has already been paid as part of this payout and another $25 million is expected to be paid by 2010-end. A majority of this initial payout is understood to have been funded from the receipt of licensing fee and internal accruals. Strides has time till next year-end to pay out the remaining. It is understood that Strides will have to tap external funding to fill the gap and according to industry sources, the external dependance will be to get the bare minimum necessary. The company is leveraged around 1.91 times by end of 2009.

The mid-size pharma company recently entered into a collaboration with American drug maker Pfizer for developing and marketing 40 sterile injectables and oral medicines in US market.

Industry experts say that the deal is a game changer for Strides as the company was earlier vying for around $100 million PE funding to grow its injectables business. However, according to sources, Strides didn’t pursue it owing to sound licensing fee from Pfizer.

Strides had posted a net profit of Rs 39.83 crore for January-March period (Q1 of 2010), a rise of more than 280 per cent over the corresponding period last year. Revenue of the company was at Rs 381.52 crore for this period, up by 30 per cent over the same period last year.

The company has 129 filings before various health regulators by March-end, from which 32 are in pharma and 97 in the specialities space. It has already received 38 approvals as of now and is waiting for the remaining 91 drug approvals from the US health regulator.

The mid-size pharma company has 14 manufacturing facilities in six countries, including its joint venture with Aspen in India.