Engaged in the manufacturer of finished pharmaceutical dosage forms - both branded and generic, the company has 14 manufacturing facilities in six countries. It can boast of having tie-ups with five of the top 10 global pharmaceutical players and a presence in over 75 countries.
Strides Arcolab has invested significantly both in world-class manufacturing capabilities and a comprehensive product portfolio in sterile injectable. What is more, two of the biggest global pharmaceutical companies, GlaxoSmithKline and Pfizer, have selected SAL as their preferred partner.
Financially, the company has been growing from strength to strength. During the last three years, its sales have expanded from Rs. 1020 crore in the calendar year 2008 to Rs. 1761 crore in 2010 with the net profit inching up from Rs. 108 crore to Rs. 122.5 crore during this period. We expect the turnover to cross Rs. 2000 crore this year (2011) and Rs. 2500 crore next year with a corresponding improvement in earnings. The company's financial position is very strong with reserves as on 31 December 2010 amounting to Rs. 1223 crore against the paid up equity capital of Rs. 58.30 crore. The company has not made any bonus issue so far.
The global market for the company's specialty products is estimated at around $200 billion and is growing at a rate of around 11 per cent per cent per annum. What is more, the number of players in the sterile injectables space has come down dramatically on account of stiff regulations. As a result, specialty products business of SAL enjoys an enviable combination of low competition and high profitability. Realising this, the company has invested around Rs. 1500 crore in the last 3 to 4 years to jack up its production capacity in the sterile injectables space. As many as 35 products of the company have been approved by regulators and all of these products would be launched within the next 4 to 5 months. In fact, the company is planning to introduce more new products. The specialty business, which contributed 27 per cent to the company's revenues in the year 2009, is expected to shoot up to 47 per cent in 2012.
The company's wholly-owned subsidiary Onco Therapies has received the US FDA approval for cladribine injection, which belongs to the group of Cancer-fighting medications known as anti-neoplastics. There is good market for this drug. According to IMS (an intelligence and marketing company for pharma research) data, the US market for generic claderibine is around $5.3 million and there is only one major player viz. Pfizer. This product will be launched very soon.
Onco Therapies has also received the US FDA approval for paclitaxel injection and tentative nod for oxaliplatin. There is a good market for these two products, which are part of the company's oncology portfolio. According to IMS, the market size for paclitaxel is around $46 million and that for oxaliplatin $1.4 billion.
The company has entered into collaboration with two of the topmost multinational pharmaceutical companies viz. GSK and Pfizer. Under these licensing arrangements, SAL will get floor price, profit share and also royalty. The deal with GSK is to supply 10 oncology injectables through its subsidiary Onco Therpaies. The deal can be extended to 45 products. GSK will market SAL products in as many as 95 emerging markets excluding sub-Saharan Africa and India. Under the deal with Pfizer, SAL will supply 40 off-patented products, mainly oncology injectables. Pfizer will market these products in the USA, European Union, Canada, Australia, New Zealand, Japan and Korea. The agreements with these countries will expire on different dates between 2019 and 2025.
Besides Pfizer and GSK, the company has also out-licensed molecules to other players like Aspen, Sandoz and Teva. Till date, SAL has out-licensed around 81 products that have a potential market size of $10.1 billion.
In December 2010, Agila Specialities, the wholly-owned subsidiary of SAL, formed for the speciality products division, had acquired 70 per cent stake in Inbiopro Solutions, a biotech firm at an investment of Rs. 65 crore. This acquisition has enabled SAL to access a pipeline of eight products with global sales of $28 billion. Of these 8 products, five are used in treatment of cancer and their commercialisation is expected to start in 2013. To start with, the company proposes to launch these drugs in India, Canada, Asia, UK, Turkey, Indonesia and Brazil.
The company's pharmaceuticals business, which accounts for 61 per cent of the total revenues, is growing slowly but steadily. However, the shift in focus from the low-margin pharma business to the high-margin specialty business will improve the overall profitability and operating cash flows. This will help the company to steadily bring down its huge debt burden which stood at over Rs. 2010 crore at the end of 2010. We expect the debt to come down substantially within the next 2 to 3 years.
Indeed, the future for the company is highly promising. The 10-rupee share is quoted around 35 times. Investment is this stock is bound to yield substantial appreciation in medium to long run.
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