May 03, 2011, 01.31 PM IST | Source: CNBC-TV18

Strides, Pfizer to deal post US FDA nod on Oncology unit

Strides Arcolab received a nod by the US FDA for an Oncology unit in Bengaluru. Arun Kumar, group CEO and vice chairman of Strides Arcolab, in an exclusive interview with CNBC-TV18 shares that the company expects approvals on approximately USD 4-5 billon product filings in the next few weeks.

Arun Kumar, group CEO and vice chairman , Strides Arcolab

Strides Arcolab received a nod by the US FDA for an Oncology unit in Bengaluru. Arun Kumar, group CEO and vice chairman of Strides Arcolab, in an exclusive interview with CNBC-TV18 shares that the company expects approvals on approximately USD 4-5 billon product filings with the US FDA over the next few weeks.

40 oncology drugs have been out licensed to Pfizer , and Kumar further confirms that the Pfizer partnership is the most impactful. He also says that this approval allows the company to operate in a niche space within US.

Below is a verbatim transcript of Arun Kumarís interview with CNBC-TV18ís Latha Venkatesh and Soniya Shenoy. Also watch the accompanying video.

Q: Could you confirm the US FDA approval?

A: We have received the approval from US FDA for our new oncology plant over the weekend. It was a much awaited approval status. We expect to receive products approvals and commence a partnership with Pfizer. I had planned this in H2 and I have guided it in February in H2.

Q: What is the roll out of products? Can give us some impact that it will have on your P&L? We are given to understand that 40 oncology drugs have been out licensed to Pfizer.

A: Oncology is approximately USD 70 billion of the specialty injectable universe that we operate. The Pfizer partnership is the most impactful and meaningful partnership that we have. We have approximately USD 4-5 odd billon of product filings, which are already with the US FDA. We expect product approvals to come now during the next few weeks before we can start supplies of individual products into the market.

Q: What would this do to your capacity utilization? Currently, it stands at somewhere around 30% or so. Would it help you improve it significantly and thereby how much of a drop you think you can do, in terms of cost as well?

A: The oncology facility is a standalone dedicated plant. As you know anti-cancer drugs canít be made in existing facility. It just allows Strides to operate in a completely new niche and segment for the US market. Anti-cancer drugs is the larger part of the specialty business. We are very excited about the prospects of launching products there. In terms of capacity utilization, our five plants now in India are all FDA approved with this approval.

We have already commenced the transfers of products from our old facility to new plant which was approved two weeks ago. We expect the capacity utilization to be significantly higher. More importantly, our cost absorption would be much easier, now that we have product sales because earlier they were impacting our profit and loss to a large extent.

Q: You had guided for about Rs 2,200 crore in terms of consolidated sales for calendar year 2011 and EBITDA of about Rs 440 to 480 crore. Would that stand improved or does that factor in oncology?

A: Our guidance mentioned that it assumes our facility approvals would be in place before H1. We are delighted that it is a little ahead of schedule. However, at this moment in time we do not believe that there would be any significant shift in the numbers. Our pharma business focuses on specialties. We are not growing at the same 30% - 35% guidance that we have done. Therefore, altogether the specialties business will probably do slightly better than guided but itís a little too early to say because product approvals are very specific in nature.

The timing of those would be crucial. Therefore, around that time, towards the end of this month or middle of next month we will re-look at the guidance. At this time, our guided number is already very aggressive and we are very confident about it.

Q: You had indicated that by the end of this particular calendar year, you would have about 15 more approvals and 25 have already been approved in terms of commercialization of the additional products. Do you stick with that figure or do you think you could increase that?

A: We are expecting oncology products in the list, so there wouldnít be any change on a number of products. Our capacities have increased significantly, with the approvals we received two weeks ago. It should allow us to commercialize all the products that we already got approved which wasnít the case all of last year.

Strides Arcolab stock price

On April 21, 2015, Strides Arcolab closed at Rs 1113.65, down Rs 6.5, or 0.58 percent. The 52-week high of the share was Rs 1249.00 and the 52-week low was Rs 451.00.

The company's trailing 12-month (TTM) EPS was at Rs 69.51 per share as per the quarter ended December 2014. The stock's price-to-earnings (P/E) ratio was 16.02. The latest book value of the company is Rs 273.58 per share. At current value, the price-to-book value of the company is 4.07.

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