Strides Pharma falls 5% from 52-week highs on spin off of CDMO

Shares of Strides Pharma fell  3 percent to Rs 518 per share on September 26, after the company announced plans to spin off its CDMO (Contract Development and Manufacturing Organisation) and soft gelatin businesses into a new entity, which would likely list in the next 12-15 months. The company, moreover, fell 5.6 percent from its 52-week high level of Rs 549 apiece touched on September 25.

In the past one month, shares of Strides Pharma jumped 22 percent, as against 1.5 percent gain in the benchmark Sensex index.

As per the exchange filing, the company is proposed to combine identified CDMO business of Strides, the identified CDMO business of Steriscience and the soft gelatin business under Stelis under one entity called OneSource.

Strides Pharma shareholders would receive 1 share of OneSource for every 2 shares of Strides in the swap ratio of 1:2. The implied value OneSource for Strides shareholders is Rs 364/share. Strides shareholders would hold 44 percent of OneSource economics.

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The resulting company OneSource is proposed to be listed on the BSE and the National Stock Exchange of India (NSE) as part of the Scheme. The listing is expected to happen in 12 months, according to the press statement.

OneSource will be India’s first specialty pharma pure play CDMO, which would include Biologics and high-end drugs combination, oral technologies, and sterile injectables.

Going ahead, the management said that they expect OneSource business to achieve sales between $180 million and $200 million with ~30 percent earnings before interest, tax, depreciation, and amortisation (Ebitda) margin based on strong order-book on all 3 business divisions.

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