Hyderabad: Drug maker Strides Shasun Ltd on Wednesday said its board has approved hiving off its active pharmaceutical ingredient (API) business into a subsidiary to give more focus.
“The (API) business requires a different level of focus,” Strides said in a statement to stock exchanges,
“With the new set of regulatory and statutory compliance, the commodity API business will need its own leadership team and strategy. To achieve its strategic objectives, the business will be carved out,” the company said.
The API business which the company calls pharmaceutical services and active ingredients or PSAI division—contributed about a third of the company’s Rs.3,177 crore revenues in 2015-16.
API is the key ingredient of a formulation or finished drug.
Strides with two API manufacturing facilities in India and one in UK, is a global supplier of painkiller ibuprofen, anti-acidity ranitidine and anti-epileptic medication gabapentin.
After the merger of rival Shasun Pharmaceuticals Ltd in September 2014, Strides has been focusing more on formulation business in regulated and emerging markets and supplies to multilateral agencies.
“Focus of API segment shifting towards captive consumption, providing source security for formulations business,” Strides management said in the annual report.
The company said it is also working on rationalisation of API portfolio for external sales with focus on improving margins by servicing high entry barrier markets and leading customers with an improved product mix.
On Wednesday Strides posted a net profit of Rs.26.04 crore for the quarter ended 30 June, largely driven by improved sales in regulated markets and institutional business, despite declining API business.
Total income stood at Rs.907.7 crore in the first quarter for the quarter. The results are not comparable with previous year, as Strides merged with Shasun in September last year.
Sales from regulated markets stood at Rs.371 crore, and institutional sales were at Rs.138 crore. The PSAI segment contributed about Rs.217 crore.
“The commodity API business continues to put pressure on margins with cost of compliance going up,” said Arun Kumar, executive vice chairman and managing director of Strides.
“We are focussed on improving the quality of our businesses and have taken various initiatives that will start bearing results in the second half of the fiscal year,” Kumar said.
The company said it has completed acquisition of a controlling stake in Australia-based Generic Partners Holdings.
Shares of Strides dropped 4.69% to close at Rs.1,059.05 on BSE, while the benchmark Sensex declined 0.21% to end at 28,005.37 points.