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Strides Pharma says could take 3-4 qtrs for normalcy of US business hit price erosion

Strides Pharma says could take 3-4 qtrs for normalcy of US business hit price erosion

said it would take at least three to four quarters for its US business operations to return to normalcy, which was hit by price erosion of its base business, which was as high as 40%.

The company now has pushed its US revenue guidance of $225 – $250 million FY22 by one more year.

The company on Wednesday reported a net loss of Rs 168 crore in Q2FY22. In the H1FY22, Strides accumulated a net loss of Rs 376.6. Revenues declined 9% YoY to Rs 736 crore. US business alone contributed more than one-third of revenues at Rs 250.2 crore ($34 million)in Q2FY22, down 38% YoY. At its peak, Stride’s US business was hitting $58 million on a quarterly basis.

In an interview to ET, R Ananthanarayanan, Managing Director & CEO, said the US sales slide happened as its portfolio is acute heavy, which took a hit due to COVID-19 pandemic and lack of new product launches to compensate for base business price erosion.

Ananthanarayanan said the price erosion was due to inventory pile up in the channel in anticipation of drug shortages. As the expiry dates neared, drug makers resorted to slashing prices to clean up inventory. Drugs typically have expiry dates of 1-2 years.

In addition to US pricing pressure, the company said it saw supply chain disruptions due to COVID infections among its workforce and saw logistics prices touching the roof.

“The freight rates have gone up by almost 3-4 times.. the logistics cost as a percentage of sales rose up to 12.2%, as compared to historic levels of 4-5%,” Ananthanarayanan said.

US recovery

Ananthanarayanan said there has been some stabilisation of prices in October.

“The silver lining is that the entire month of October we haven’t seen any price challenge, so we believe that the pricing environment is stabilising at much lower levels,” Ananthanaryanan said.

“We will wait for prescription rates to go up as COVID scenario eases,” he added. He further said the company, while faced with pricing pressure, didn’t give up its share in the market.

The company is also primarily banking on the acquired generic portfolio from US drug maker Endo to help recovery of US business. On August 6, 2021, Strides announced acquisition of Endo manufacturing facility in the US along with a basket of ANDAs for $24.9 million. The transaction achieved closure on October 20,2021.

Ananthanarayanan said With the acquisition of ANDA’s at Chestnut Ridge, the combined portfolio enables diversification with addition of chronic products and controlled substances. The acquisition more than doubles the approved ANDA basket for Strides including 20 commercial products transferred to Strides on transaction closure.

Ananthanarayanan said the acquired portfolio is generating $50 million per annum for Endo, but during its peak, it used to garner sales of about $70-$75 million.

“We are reviewing the portfolio, to see how best we can maximise the value of the portfolio,” Ananthanarayana said.

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