Focused on restoring growth
I begin with the hope that this letter finds you and your loved ones atthe top of your health and spirits. In every way the global community as well asbusinesses have waded through a sea of change during the last two years. With a sinisterCovid wave re-emerging in the country at the beginning of the year widespread supplydisruptions commodity price rises and the Russia-Ukraine conflict deepening FY 2021-22was a challenging year for several sectors and the state of affairs was no different forthe pharmaceutical industry and for Strides. That said we have made exemplary efforts asan organisation to stay resilient and focused on a sharp bounce back to cushion thebusiness and add more value with our offerings.
Making sound decisions
We witnessed unusual price erosion and volume drops in the US leadingto a significant contraction in our gross margins. The other regulated markets deliveredtepid growth due to Covid-related disruptions. Our Emerging Markets business witnessedgrowth as the region was not significantly impacted by the challenges peculiar to theregulated markets.
Despite a difficult year we have been seeing green shoots from Q4 FY2022. As the Company?s founder and promoter I acknowledge that we couldn?tdeliver to our potential. It is simple to rationalise the challenges of the businessenvironment however accepting responsibility fixing inadequacies charting a new courseand moving forward are most important.
I am excited to return to Strides in an executive role and we arecommitted to restoring the Company to its former health. We are working towardsstrengthening our fundamentals and developing strategies in response to the changingpharmaceutical landscape.
As we gear up for a faster recovery in FY 2022-23 we have devised aclear strategy that focuses on our global product supply.
We implemented a number of capability-building programmes to help usimprove our performance. Furthermore we have established distinct strategic prioritiesfor each key market.
The US remains a key focus market
We have seen improvement across our businesses since Q4 FY 2022including the recovery of our US business. We are progressing further by integratingChestnut Ridge operations in the US which will help us achieve our target of over $250Million in revenue from US operations in FY 2022-23. Given that we have over 150 productsapproved we should be able to see sequential growth in the US giving us room to grow thebusiness from there. We have plans to launch around 20 products per year from this fiscal.Our new domain additions which include controlled substances hormones and nasal sprayswill help accelerate portfolio differentiation thereby driving growth.
Scaling up ORMs
Other regulated markets or ORM is an important part of our growthstrategy fuelled by our frontend in key markets and IP-led B2B partnerships in EuropeAustralia and other parts of the world.
In these markets our R&D investments will fast-track growthopportunities for the Rx and OTC portfolios as several new products will be launched inFY 2022-23.
Market and portfolio expansion in emerging markets
Our emerging market business includes African and institutional oraccess market verticals.
The access market vertical has a relatively lower margin but it iscritical to reducing under-recoveries at our manufacturing sites given the volumes. Ourcost leadership and selective product portfolio expansion will drive institutionalbusiness growth. In Africa we are focusing on scaling up our business by expanding ourgeographic footprint in the region and ensuring better penetration of existing marketsthrough portfolio expansion.
While the operating environment continues to evolve and is ambiguouswe remain optimistic and confident about delivering significant value to our stakeholdersin the coming years. We have made several changes to our businesses focusing on growthimproving cash flows and debt reduction. In addition the focus will be on efficientinventory management improving capacity utilisation and optimal capital allocationthereby reducing under-recoveries.
We will also optimise our manufacturing network for better outcomes andaggressively focus on cost and debt reduction. We plan to reduce our gross debt by morethan '1000 crores in FY 2022-23 targeting Net Debt to EBITDA below 3x.
Finally I would like to thank everyone who has supported Strides overthe years. I reassure you that we will continue to uphold our core values of integritycollaboration and efficiency while creating sustainable value for all stakeholders. I amexcited about the journey ahead with the Board?s guidance and the advice andcollaboration of my management colleagues employees partners customers and all of ourstakeholders.
Warm regards Arun