Strides to invest Rs 1350 mn in 24 months in SteriScience, sterile injectables arm

Strides Pharma Science announced that it is investing in SteriScience Pharma to make it the company’s dedicated arm for global sterile injectables business.

“SteriScience has started the development activity for 20+ quick to launch products and expects the first Abbreviated New Drug Application (ANDA) filing to be achieved within FY21. It has also entered into a joint venture with Brooks Laboratories for building a robust carbapenem business with integrated manufacturing capabilities. The transaction with Brooks is subject to approval from the shareholders of Brooks,” informed the company through a statement.

As Agila Specialties, Strides had a sterile injectable business with capabilities for carbapenems, beta-lactams and oncology. The business was sold to Mylan for an enterprise value of $1.6 billion with Rs 605 per share distributed as a special dividend to Strides shareholders. On September 20, 2019, Strides announced that it would re-enter into sterile injectables business post the completion of the company’s non-compete period with Mylan. The non-compete period ended in December 2019. Given the unexpected developments due to Ranitidine product withdrawal from the US markets and COVID-19 outbreak, the Company had put on hold all the new investments. However, the Company retained the option to participate in the injectable platform SteriScience in partnership with the family office of the promoters until December 2020 with a ~54 per cent economic interest.

SteriScience plans for a global foray in sterile injectables leveraging the group’s experience in the domain.

Strides and the family office of promoters will partner to infuse capital into SteriScience. The partners will also transfer their current sterile injectable related assets and Intellectual Property (IP) to the platform at cost. The business will require a total investment of Rs 4,000 million (Rs 2,500 million equity and Rs 1,500 million debt) until it achieves an operational break-even in the next 24 months. The partners will invest this amount in proportion to their ownership (Strides will contribute Rs 1,350 million for a ~54 per cent ownership, while the family office of the promoters will make the remaining investments).

The investments are envisaged for the following:

Development of the portfolio. The company informs that it has alreadty commenced this through by a three-pronged strategy viz. acquired IP with significant cross-market opportunity, in-house development of products and by strategic partnerships with high-quality R&D organisations to in-license late-stage products with a focus on specialty injectables. The Company expects to develop 20+ quick-to-market products and intends to file its first ANDA within FY21.

JV with Brooks for Carbapenems: SteriScience has entered into a JV with Brooks to carry out manufacturing, marketing and distribution of carbapenems for the global markets. Carbapenems are a class of highly effective antibiotic agents commonly used for the treatment of severe or high-risk bacterial infections. Reportedly, it is a $2 billion+ global opportunity with limited players having dedicated capabilities to manufacture these products. As part of the transaction with Brooks, SteriScience will have a majority economic interest to commercialise four products in the global markets along with the integrated infrastructure to manufacture both drug substance and drug product internally.

The broad terms of the JV transaction between SteriScience and Brooks are:

1. i) SteriScience and Brooks will set up a front-end entity to market carbapenem products in the global markets, including the US, Europe, Canada, and Australia. This front-end entity will also own the IP/ANDAs/dossiers of all the carbapenem products across markets. The economic interest for SteriScience will be ~56 per cent.
2. ii) SteriScience will invest Rs 100 million in the front-end entity for the regulatory filings. The EU Filing for the first product was completed in August 2020.

iii) Subject to the approval from Brooks’ shareholders, Brooks shall transfer its EU approved manufacturing facility at Vadodara, India to a Joint Venture Company on a debt-free basis. SteriScience will have ~27 per cent economic interest in this JV Company and will invest up to Rs 400 million over 12-15 months period in this facility to create additional capabilities including the manufacturing of all carbapenem APIs and also to commission a dedicated lyophilization line for Ertapenem.

1. iv) This manufacturing facility will be an exclusive partner to the front-end entity for the international markets.