Stelis sells Bengaluru facility to Biocon arm Syngene for Rs 702 cr

Both parties have entered into a binding term sheet to execute the deal whereby Syngene has acquired the unit 3 facility in Bengaluru for Rs 702 crore

Stelis Biopharma, a contract development and manufacturing organisation (CDMO) and the biologics arm of Strides Pharma Science is divesting its multi-modal manufacturing facility at Bommasandra Industrial Area, Bengaluru on a slump sale basis for a gross value of Rs 702 crore to Biocon arm Syngene International.

Syngene is the research arm of Biocon. It posted full-year revenue from operations of Rs 3,193 Crore, up 23 percent in FY23 and PAT before exceptional items at Rs 464 crore, up 10 percent.

Both the parties have entered into a binding term sheet to execute the deal whereby Syngene has acquire Unit 3 facility in Bengaluru for Rs 702 crore. Subject to closing adjustments, the consideration for the transaction will be settled in cash by Syngene. The transaction has been approved independently by the respective Boards of Directors of Stelis and Syngene. The transaction is expected to close within 90 days, subject to customary conditions, including receiving required lender and regulatory approvals

Shares of Strides Pharma rose 3.3 per cent to Rs 483 on Tuesday while Syngene shares were down 1.7 percent on the BSE.

The facility, which was initially built to manufacture Covid 19 vaccines, is now being repurposed to manufacture monoclonal antibodies and Syngene will further invest up to Rs 100 Crores ($12Mn) to repurpose and revalidate the facility, Syngene said 

Jonathan Hunt, Managing Director and CEO of Syngene said that the acquisition adds drug substance capacity years ahead of Syngene's internal capex program. 

_We expect this facility to be operational in 2024, following completion of a programme of facility upgrades and re-validation.” Hunt said 

Sibaji Biswas, Chief Financial Officer, Syngene said, “This acquisition effectively replaces an internal capex investment program planned for the next three years and will be fully funded through internal accruals and cash."

"As we ramp up utilization, we expect asset turnover to grow to 1x in less than 5 years, with EBITDA margins expected to be in line with the Company average from FY29," Biswas added. He said they expect the plant to contribute positively to the bottom line from FY27.

The facility covers both drug substance and drug product with installed capacity of 10 bioreactors of 2000 litres along with associated infrastructure and utilities. The facility also includes 10 additional uninstalled bioreactors - providing the potential for future expansion - and two high speed fill-finish lines

Stelis will continue to expand its client base through global partnerships and the induction of new drug substance (DS) and drug product (DP) programs at its integrated drug substance and drug product flagship facility (Unit 2) in Bengaluru, the company said in a statement.

“Stelis will also have the Unit 1 facility, which is equipped for process and analytical development for small-scale early and late-stage development studies of drug substances and drug products, as well as initial technology transfer activities across various modalities,” it added.

The Unit 2 flagship site is approved by the USFDA, EU-GMP, TGA, Australia, amongst several other regulators. Stelis can make different drug products like cartridges, pen devices, auto-injectors, pre-filled syringes, liquid, and lyophilized vials. It is a biologics and injectable CDMO player.

In May 2021, Strides reduced its stake in Stelis to 37.09 per cent from 54.48 per cent after Stelis raised a Series C funding of $125 million from TPG Growth fund, Route One, Think Investments and the Mankekar Family. The funds were used for capex of the contract development and manufacturing business, accelerating the vaccine block infrastructure with ability to cater to multiple vaccine types, including viral vector, protein subunit, RNA and DNA, and also for debt servicing.  
 

Around March 2021, Stelis announced that it would be making 200 million doses of the Sputnik V vaccine for Covid-19 as it tied up with the Russian Direct Investment Fund (RDIF). However, low demand for the vaccine in India as well as the Russia-Ukraine war derailed Stelis’ plans.

Strides has been facing significant challenges with Stelis. During the fourth-quarter earnings call, Arun Kumar, executive chairperson and managing director of Strides Pharma, had said, “We reduced Stelis’ peak debt from Rs 1,200 crore to Rs 650 crore at the end of March. And this is despite a very significant impairment, mainly out of Sputnik,” he said.

Kumar also added that Stelis had appointed strategic advisors for the reset. “So most critical for Stelis is that, we can confirm, we will be Ebitda (earnings before interest, tax, depreciation and amortisation)-positive. We will still have some challenges around the mismatch in cash flows. We are resolving many of those things,” he said, adding that the outstanding debt in Stelis was about Rs 600-odd crore after cash and cash equivalent.

Kedaara Capital, Warburg in talks to buy stake in Appasamy

Kedaara Capital and Warburg Pincus are in a race to buy a controlling stake in medical device maker Appasamy Associates for Rs 1,800 crore. Appasamy Associates has grown to become the leading manufacturer and distributor of ophthalmic diagnostic equipment and surgical systems. Emails sent to Kedaara, Warburg and Appasamy Associates did not elicit any response till going to press.