Strides Pharma announces strong Q2FY20 performance

by Suman Gupta

MUMBAI,OCTOBER, 2019 :

Key highlights Q2FY20 Financial Results:

• Strides’ Q2FY20 consolidated revenues stood at ₹7,180m demonstrating 37% YoY and 4% QoQ growth

• Consolidated EBITDA at ₹1,506m, up 210% YoY and 22% QoQ

• US markets delivered a sequential growth to report $57m revenues in Q2FY20 despite temporary supply disruption of Ranitidine

• Its front end business reaches ~$40m revenues in Q2FY20 , growing over 4x scale from ~$10m revenues in Q1FY19

• The business in other regulated markets grew 30% QoQ and 60% YoY to report ₹2,220m ($32m)

• The R&D spend in Q2FY20 was steady at ₹255m

• Continued focus on enhancing portfolio for other regulated markets with 3 new product filings in Q2FY20

• Focus on building capabilities in sterile injectables with incremental ~$40M investments over 24 months for a controlling stake in Stelis Biopharma.

NOTE:

1.These financial results have been prepared in accordance with Indian Accounting Standards (‘Ind AS’) prescribed under Section 133 of the Companies Act, 2013 and other accounting principles generally accepted in India and in terms of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

2.The above consolidated results were reviewed by the Audit Committee and approved by the Board of Directors at their meeting held on October 25, 2019. The statutory auditors have reviewed the results for the quarter and
half year ended September 30, 2019 and have issued an unmodified opinion.

3.Effective April 1, 2019, the Group adopted Ind AS 116 ‘Leases’, applied to all lease contracts existing on April 1, 2019 using the modified retrospective method and has taken the cumulative adjustment to retained earnings, on the
date of initial application. Accordingly, comparatives for the year ended March 31, 2019 have not been restated.The effect of this adoption has resulted in recognition of Right- of- use assets (ROU) amounting to Rs.16,214 Lakhs
and lease liability of Rs. 19,202 lakhs, resulting to a debit of Rs. 2,664 Lakhs (net of taxes) to retained earnings.
Further, it has also resulted in decrease in other expenses of Rs. 1,340 lakhs, increase in Interest expenses (included under finance cost) of Rs.707 Lakhs and an increase in depreciation and amortisation expenses of Rs. 845 lakhs,
resulting in a reduction in profit for the half year ended September 30, 2019 by Rs.212 lakhs.

4.During the previous year, the Board of Directors had proposed to divest the Group’s equity interest in the Australia business to Dennis Bastas- Executive Chairman of Arrow Pharmaceuticals Pty Limited, Australia (Arrow). Further, the
group had obtained the approval from the Company’s shareholders’ in the EGM held on March 27, 2019.
On July 10, 2019, the Group completed the divestment of its Australia business for a consideration of AUD 406 Million (including a deferred consideration of AUD 106 Million) reduced by the bank debt settlement of AUD 22.47
Million. Additionally, the Group has retained global access to IP’s of over 140 products and has concurently entered into a preferred supply agreement with Arrotex. The resulting gain from the disposal of Rs.1,142 lakhs is
accounted under the head “Gain on disposal of assets attributable to the discontinued operations (net)” and is presented as part of discontinued operations.
Accordingly, the Group has classified the Australia business operations as discontinued operations.