Strides Pharma Announces Spin-off of CDMO and Soft Gelatin Businesses, Share Price Falls

Strides Pharma Announces Spin-off of CDMO and Soft Gelatin Businesses, Share Price Falls

VoM News Desk | September 26, 2023 | 02:28 PM IST | Breaking News | Follow on Google News

Strides Pharma Announces Spin-off of CDMO and Soft Gelatin Businesses, Share Price Falls

Strides Pharma Science’s share price experienced a decline of over 3% in early trade on Tuesday following the company’s announcement of its plan to spin off its Contract Development and Manufacturing Organization (CDMO) and soft gelatin businesses into a new entity. Strides Pharma shares fell to as low as ₹518.40 per share on the BSE.

The share price of Strides Pharma was down 5.5% from its 52-week high of ₹549.00 per share, which it reached on September 25.

Formation of OneSource Entity

In a regulatory filing on Monday, Strides Pharma Science disclosed that its board had approved a scheme of arrangement among group entities to consolidate the identified CDMO business of Strides, the identified CDMO business of Steriscience, and the soft gelatin business under Stelis into a single entity called OneSource.

The company’s board envisions the creation of a specialty pharmaceutical contract development and manufacturing organization with expertise in biologics, oral soft-gels, complex injectables, sterile injectables, and other complex drug delivery systems.

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The new platform aims to offer development and manufacturing services encompassing platform technologies, specialty injectables, complex generics, biosimilars, and biologics.

Timeline and Ownership

Strides Pharma Science anticipates that the formation of the new company, OneSource, will be achieved through the National Company Law Tribunal (NCLT) process in the next 12 to 18 months, given the complexity of merging and demerging multiple companies into the structure.

Upon completion of the process, Strides Pharma shareholders will receive 1 share of OneSource for every 2 shares of Strides, with an implied value of ₹364 per share. Strides shareholders will hold a 44% stake in OneSource.

The scheme of arrangement is expected to be finalized by April 1, 2024, and Strides Pharma anticipates that OneSource will achieve sales between $180-200 million in FY25.

Demerger of Businesses

As part of the process, Strides Pharma will demerge the oral soft gelatin business and the identified CDMO business into Stelis. After the demerger, Stelis will issue equity shares to the shareholders of Strides and SteriScience, determined by an independent valuer’s recommended share entitlement ratio.

Market Reaction

Following the announcement, Strides Pharma shares initially declined but later recovered, trading 0.62% higher at ₹538.95 apiece on the BSE as of 10:45 am.

The restructuring move is aimed at positioning Strides Pharma as a formidable CDMO entity in the pharmaceutical sector in the coming years, with a focus on specialized contract development and manufacturing services.

VoM News Desk

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