Strides Shasun to Spin Off API Business in Company Restructure

Strides Shasun, a Bangalore, India-headquartered pharmaceutical company, has announced a company restructuring that will form a consumer formulations business to be named Strides Pharma and that will include a spin-off of its commodity active pharmaceutical ingredient (API) manufacturing business into a new company.

Strides is moving away from its business-to-business (B2B) model to a business-to-consumer (B2C) model, which the company said will focus on what it terms as front-end businesses. The restructuring is directed toward developing a sharper focus on compliance, supply chain, and front-end businesses to provide growth for Strides’ consumer-facing formulations business.

The new B2C company, which will be named Strides Pharma and retain the former Strides Shasun’s core business, will operate through two divisions: regulated markets and emerging markets. The regulated markets division will have a front-end presence in Australia, the US, and the UK. This division will include four US Food and Drug Administration (FDA)-approved manufacturing facilities in India, Europe, and Singapore (where a proposed facility is under construction) and three research and development centers that comprise of 400 scientists targeting 25 abbreviated new drug application filings per year. The bulk of these filings will receive API supplies from the recently acquired Perrigo API facility in India. In December 2016, Perrigo agreed to sell its entire shareholding in Perrigo API India to Strides for Indian rupee 1000 million ($14.8 million), which includes an API manufacturing plant in Ambernath, Maharashtra with a potential capacity of 600 tons per year.

The second division, the emerging markets business, will consist of Africa, India, and donor-funded programs under the institutional franchise. While the branded generics business in Africa will continue on its own growth trajectory, Strides’ “In Africa for Africa” manufacturing strategy will be consolidated under a recently acquired facility from the Universal Corporation in Kenya. This facility will also cater to global donor funding programs. Six generic drug facilities in Africa are to be divested to an existing management team led by Strides Shasun executive Sinhue Noronha

As part of the restructuring, Strides plans to spin off a standalone API company. Strides is seeking shareholders’ approval to de-merge the commodity API business of Strides Shasun into a new listed entity. As part of the same plan, Strides also proposes carving out the human API business of SeQuent Scientific, an India-based pharmaceutical company that makes APIs for animal and human health, and integrating it into the new API company, providing critical mass to the business. The API company will start off with a portfolio of drug master files and five manufacturing sites, including three FDA-approved facilities.

The spin-off transaction was in principle approved by the board of both Strides and SeQuent and is subject to approval from shareholders and meeting customary closing conditions. The appointed date for the scheme of merger will be October 1, 2017.

Under the restructuring, Strides’ wholly owned biotechnology subsidiary, Stelis Biopharma, will continue to pursue a B2B business model and will derive income from contract development and manufacturing organizations and licensing engagements in the regulated markets and from its front-end in emerging markets. Strides has been evaluating over the last several months various options to demerge the biotech business. However, Strides says that Stelis Biopharma is not yet ready for a separate listing because generation of commercial revenue is only expected to kick in at a later time, and the current growth phase will require significant upfront investments.

Also as part of the restructuring, Strides intends to divest the probiotic portfolio that it previously acquired with a 51% stake in the probiotic business of Shriram Group. The company says the business has not achieved its intended strategic objectives and milestones over the last 12 months, and it now seeks to exit the business. The promoters of Strides Shasun will acquire the 51% stake of the probiotics business owned by Strides, and the business will be managed by Medispan, the pharmaceutical unit of Shriram Group.

Source: Strides Shasun

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