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Strong growth across geographies..

Strides Pharma Science (STAR) is an R&D focussed, vertically integrated pharmaceutical company with an experienced management team having presence across multiple therapeutic segments.

* Strides revenues in Q4FY21 grew by 47% YoY to Rs.908 cr during the quarter with sales growth in the regulated markets and emerging markets.

* The emerging markets grew by 107% YoY with growth in institutional biz. driven by TDL.

* The company announced its partnership with TLC to launch Amphotericin B Liposome for Injection 50mg.

* We expect a revenue CAGR of 15% over FY21E-FY23E on the back of strong existing product portfolio, new product basket to aid COVID treatment and strengthening of front-end presence.

* Hence, we upgrade our rating from “Accumulate” to “Buy” based on 16x FY22E EPS and target price of Rs.936.

Healthy performance amidst tough environment

Strides Q4FY21 revenue grew by 47% YoY to Rs.908 Cr. during the quarter with robust sales growth, strong bounce-back of the emerging markets (+107% YoY to Rs. 212 Cr.) and a well-diversified regulated business cutting across multiple geographies. The US market witnessed a growth of 46% YoY in the quarter driven by leveraging existing regulated markets portfolio, new product launches and by building front-end presence. However, in FY21, the company witnessed increased operating expense associated with logistics and increased price erosion in certain products.

The growth in the institutional business was driven by TDL, which was commercialized in H2FY21 along with Africa delivering healthy performance with a sharper focus on supply chain execution. Since FY20, the company has received 16 ANDAs approval in the US and has filed 11 ANDAs. In the other regulated markets, the company has filed 18 products and received 16 new product approvals in the current fiscal.

Stelis concludes US$195m Series B and Series C fund raise

Post completion on Series C fund raise, Strides will de-merge and is to hold 33% (Pre-ESOP) in Stelis with its investment valued at US$116m. Stelis Biopharma signed its first vaccine supply contract partnering with Russian Direct Investment Find (RDIF) to supply 200 million doses of the Sputnik V vaccine. The validation batches of Sputnik commenced in late May from the company’s newly commissioned facility with expectations of a large-scale facility to be in track by July despite COVID headwinds. The product is expected to be in the market by October while there are on-going discussions to partner with other global vaccine developers for manufacturing services.

TLC and Strides partner to launch Liposomal Amphotericin B in India

Taiwain Liposome Company received approval from Central Drug Standard Control Organization of India to launch Amphotericin B Liposome for Injection 50mg. The product is to be manufactured in Taiwan, imported by Stelis Biopharma and distributed in India by Strides Pharma Science Ltd. With the soaring number of COVID-19 infections, the number of COVID-19 associated Mucormycosis (CAM) cases has also been on the rise. The launch is expected to alleviate the shortage of Liposomal Amphotericin B due to this sudden surge.

Outlook and valuation

Despite lower footfalls at pharmacies and lower elective surgeries across geographies, Strides pharma posted strong numbers in Q4FY21 owing to a gain in market share due to its unique product portfolio. The launch of Amphotericin B Liposome and the Sputnik vaccination rollout along with new product launches showcase healthy growth prospects for the company. Although the increase in operating expenses is likely to remain in the short-term, strong order book and volume traction will improve margins in the long-term. Hence we upgrade our rating from “Accumulate” to ‘Buy” with a rolled forward target price of Rs.936 based on 16x FY23E EPS.

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