Stock Review: Strides Arcolabs

Strides Arcolabs has been buzzing with news flows on FDA approvals and expansion since the start of the current financial year. The stock, too, has moved in tandem, appreciating 25 per cent in the period.

In its most recent move, trying to ensure full control over its Australian subsidiary, Ascent Pharmahealth, Strides last week raised its offer price for minority shareholders from $0.35 to $0.40 ( `15.82 to

`18.08) a share, translating into a 51 per cent premium over the closing price of Ascent on December 21.

While Strides already holds 58 per cent in Ascent, it plans to raise this to 94 per cent to tap opportunities in Australia and SouthEast Asia. Ascent sells over 400 drugs in eight countries and plans to expand in South East Asia.

Strides also marked a foray into bio-pharmaceuticals by acquiring 70 per cent stake in the Bangalorebased biotechnology firm, Inbrio solutions, which gives it immediate access to a pipeline of eight biosimilar products that are estimated to have global sales of $ 28 billion. It will make an investment of `65 crore over a years for development and commercialisation of these products.

This year has been good on approvals, with 22 coming in, while another 15 have been filed. Total filings stand at 140, with 53 approvals obtained till now. The company received FDA nod for two strengths of Lidocaine injections in multi-dose vials (it already had approvals for single use vials) and various strengths of Midazolam (an anesthetic) in single dose vials in December alone.

Midazolam will be marketed by Sagent and Strides is developing and supplying 25 injectable products to Sagent to be marketed in the US.

For CY10, analysts expect the company to report a35 per cent year-on-year jump in revenues to `1,775 crore. At `423.65, the stock trades at 11.7xCY10E estimated earnings.

A stake increase in Ascent Pharmahealth augurs well, looking at the opportunities in Australia and South East Asia