US approval delays a drag on Strides' Q3 net

Confirms that sale of its specialties business to Mylan is on track as it is in process of clearing red flags raised by US-FDA

Bangalore-headquartered pharmaceutical company Strides Arcolab has seen its net profit dip 92.64% over the corresponding quarter in the previous year to Rs 2.21 crore for Q3, 2013 owing to forex losses of Rs 7 crore, and delays in regulatory approvals.

The company had seen revenues of Rs 225 crore which had risen 13%.. Despite the profit plummeting and delays in regulatory approvals, the Indian drugmaker stood by its revenue forecast for the year.

The company gave a very positive guidance for the year on revenues of Rs 1,000 crore with an EBITDA of Rs 200 crore. Its consolidated pharma revenue stood at Rs 709 crore for the nine months-ended September, while EBITDA for the period was Rs 140 crore. The full-year EBITDA outlook is Rs 200 crore.

The company had made 46 filings as on date with the US FDA and 18 are pending approvals, but it expected to get the nod for some of the products in the present quarter-ending December.

“Inspite of a subdued quarter and delay in product approvals for the US Market, the company is confident of meeting its guidance for the year,” said Arun Kumar, Vice Chairman and Group CEO, Strides Arcolab Limited, in a statement.

India's drugmakers have come under closer scrutiny this year as the US FDA has increased its presence in India as the country has grown in importance as a supplier to the US. India produces nearly 40% of generic drugs and over-the-counter products and 10% of finished dosages used in the US.

Problems at its Agila unit:

Strides Arcolab, which during early February 2013, had signed a definitive agreement to sell its specialties injectable business under Agila Specialties to US-based Mylan for $1.6 billion, has further re-iterated that the same is expected to close during the fourth quarter of 2013 as per schedule.

The US-FDA has recently issued a warning letter to Strides for violation of manufacturing norms at its sterile making facility 2 (SFF) in Bangalore. According to Strides, US regulatory authorities inspected the SFF unit in June this year and the inspection resulted in issuance of Form FDA 483 with observations.

Following this, the company had responded to the 483 observations by implementing corrective actions, it said. However, US FDA on further inspection had later issued a Warning Letter to the unit on which Strides said it is in touch with the authorities on setting right the issues.