Strides Pharma/OneSource - The Last Stand Will Create Wealth?

Tar · January 28, 2025, 10:27am

One of the risks is promoter entity selling stake in Strides. Arun Kumar has been trying to dilute his stake for sometime now. The erstwhile Stelis and SteriScience deal was structured such that he benefits from letting go of strides shares in exchange for larger shareholding in SteriScience.

It’s a low probability risk that he will dilute at such low valuation.

One of the other reasons why stock is at such low valuation today is because mutual funds who bought this for OneSource are selling (Aditya Birla, Mirae and Axis) have been selling.

The recent price action indicates there are good buyers at current levels of 595 indicating there is strong support and low chance of this breaking down further.

hemantbhatia · January 28, 2025, 10:27am

One Source listing tomorrow.
```https://www.bseindia.com/xml-data/corpfiling/AttachLive/e7253b6a-eaf0-43db-a5bf-2033e43adb79.pdf

Varad_Patil · January 30, 2025, 12:16pm

OneSource Q3FY25 Concall Snippets:

 Biologics: MSA is pre-approval and CSA is commercial (20-80 share in steady state will reach
in medium term)
 Currently, all Biologics division revenue is from MSA (pre-approved molecules)
 Currently have 20 customers in GLP-1 space and OneSource is the primary supplier of GLP-1
cartridges for all the 20 customers
 Medium-term Guidance: Revenue growth of 25-30% CAGR with 40% EBITDA Margin over the next
5 years primarily driven by commercial contracts including GLP-1
 Est. capex for next 3-4 years: USD100mn (Half from previous capital raise and rest from
accruals and customer partnerships)
 Expect interest cost to half from current levels post repayment of debt
 Target long term Net Debt-EBITDA of less than 1
 (DDC segment) Cartridges capacity expansion: Plan to expand capacity by 5x in coming years
from 40mn to 220mn cartridge units
 Ozempic patient usage is 12 pens per year and Liraglutide usage is 3x of Ozempic
 Market share in cartridge fill-finish for OneSource could be around 15-20% and target to
capture 1/3 rd market share as market forms globally as patents expire
 Already on-boarded first innovator customer for Microbial in Biologics segment

Saptarshi_Chatterjee · January 31, 2025, 4:22pm

Thanks everybody for such elaborate analysis of the stride/onesource .
Im asking kind of a basic generalized question . If I want to play GLP-1, and want a good company at cheaper valuation which ones should I be considering ? stride/ one source or there are other stocks with similar EV/EBIDTA in similar field which can create wealth for over next 5-7 years?

manoopatil · February 1, 2025, 4:12am

Strides Pharma came out with an excellent results for Q3’2025.

Below is the summary for their guidance and how they are tracking it.

Gross Margin improvement from 53.4% to 58.4% YoY despite demerger of high margin CDMO business
EBITDA margin at 18.2%, grew 401bps YoY
US revenue - $73 Mn. On track to achieve higher end of $275-$290 Mn. for FY25.
Company still aiming for EBITA of Rs. 750-800 Cr.
Rs. 134 Cr spend on capex from internal accrual. Plans to repay debt of Rs. 500 Cr. Amazing execution
Strides supply to PEPFAR is <0.5% of our global revenues and the recent announcement on funding of this program will have no impact on our business or outlook
Will continue to maintain the current EBITA margins;Management want to focus on delivering a lot more free cash flow. Cash conversion cycle is expected to reduce
Will continue to follow the philosophy to launch the product which can offer good pricing
Sustainable gross margins likely to remain around 55-58%
Over 2-3 years expected to be debt-free
Capex requirement for 2-3 years - 150-200 Crs.
Large part of US revenue comes from products manufactured in the US-Somewhat mitigating Trump Tariff risk
Liquids, Nasals spray, control substances technologies are the niches and domains the company is focusing on and done capex
Other regulated markets - Pure B2B business - company work with large partners - products are approved but the companies take longer time. Launches would take place and bring growth in second half of next year(2027).
Miniscule impact due to tax notice
Whatever free cash flow is generated will go in debt reduction
1000 Cr EBITA for FY26 looks realistic - As per Arun Kumar

Disc-Invested. One of the biggest holdings

randomquarks · February 6, 2025, 1:58pm

Onesource promotors are selling like there is no tomorrow.

I can’t find any question in the concall transcript regarding this too. Does anybody have anu idea why they selling in such huge quantitites?

rupeshtatiya · February 21, 2025, 7:45am

Following is my current view on as things stand -

ONESOURCE

Promoter Selling
Promoter has sold roughly 600cr worth of stake so far and there might be some more to go. In my mind, this is nothing more than OFS sale in IPO that usually promoters do.

Promoter founded two platforms (non-conflicting with existing Strides business) - Stelis and Steriscience.
Stelis is into biological products and fill finish. It is a capex heavy business (100mn$+) with long gestation period of 6-7 years. The business also went through several upheavals - primarily COVID (elongation of business plans) and vaccine write off. Through all these upheavals, promoter had to keep funding this platform - privately and through Strides. I think a significant part of these were funded through debt/pledges at promoter level.

The second platform is Steriscience which was really restarted in 2020 when they bought back units from Mylan. This business also needed few years to come to a shape where it can be profitable. A lot of investments in this platform was also done by promoter privately through debt and pledge.

During this time, it was not like existing listed businesses were flourishing. Strides had two notable shocks - one was Ranitidine impurity issue and other was COVID inventory write off. Solara was stuck with its Vizag unit and continued to bleed. Promoter had to inject money in both of these businesses through his own resources.

When these platforms are now listed and where business visibility is good, promoter decided to list them. Is it really unfair or red flag that he is selling partial stake upon listing to probably take care of debt at promoter level?
In my opinion, it is a non-issue but to each his own!

As of today, the debt level is more than managable in all 3 of his companies.
OneSource - long term debt of 363cr on Jan 31, 2025
Strides - Net Debt of 1571cr as of Dec 31, 2024
Solara - Projected net debt of 560cr at Mar 25, 2025.

Sources -

OneSource credit report.
( 202502140245_OneSource_Specialty_Pharma_Limited.pdf)

To my mind, this shows resourcefulness of promoter and ability to work in the markets. I also hope in the same breath that - next 4-5 years are equally dull and boring as how eventful last 5-6 years have been.

Business
Coming to business, promoter has given exciting plan for expanding cartridge capacity for GLP-1 fill finish business. We need to be focused on figuring out their large customers and how these customers are progressing in getting approvals in Canada/India/Brazil/Middle East.
My understanding is that one needs to design specific fill finish lines for each device, and it takes time to get the lines. This thesis will get tested as more and more launches of GLP-1 start happening.

The softgel business capacity has moved from 0.8bn to 2.4bn. We need to track how the capacity ramp up is happening. Promoter had also mentioned plans for additional 1bn line in softgel business. Promoter had also mentioned that some large softgel products are going off patent over next 1-2 years and these can provide good opportunity. We need to work on figuring out these products.

GLP Patent Expiry Schedule -

Canada GLP Patent Protection Expiry Dates -

STRIDES
Tarriffs
Coming to threat of 25% tariffs on Pharma by Trump, although it is a major issue if it really were to happen in this manner, Strides is probably one of the better placed players as they have a formulation facility in the US (Endo Pharma). My feeling is that with not very large capex (something like 20-30mn$), they might be able to reconfigure US supplies rather quickly if it really comes to that.

Controlled Substances & Nasal Sprays
Other area that we need to track is launch of controlled substances and nasal spray products in the US and EU markets. These are lesser competition products and do have healthy EBITDA margins. I have spent some time of Endo’s approved products in US and a lot of them are controlled substances. We need to find 4-5 products in this list which can give 15-20mn$ type revenue to the company.

Endo_Pharma.xlsx (26.5 KB)
Endo_Operations.xlsx (283.9 KB)

Disc - I have bought shares of both the companies in the last 30 days. This is not a buy/sell recommendation. I am not a SEBI registered RA. Please do your own due diligence before investing.

ashvin · March 18, 2025, 2:59pm

SPG has entered into a Share Purchase Agreement to acquire a 100% stake in Amexel for a
nominal consideration of USD 10.
Amexel is yet to commence its operations. Financial parameters of Amexel for the period ended
December 31, 2023 is as under:
 Turnover: Nil and
 Profit/ Loss and Networth: Negligible

himanshu039 · April 23, 2025, 12:49pm

If the oral version of GLP-1 picks up, would it be a huge red flag for the company? Or is there a play for Onesource even in the oral version?

Manoj_Pradhan · April 24, 2025, 1:59pm

Aditya Khemka – 24-Apr-25 (CNBCTV18) – on Oral GLP-1

Expect GLP-1 market to be extremely competitive.
Some Companies may see a benefit for 1st 6 months – 1 year in GLP-1 Post Increased competition
Oral form factors of blockbuster drugs could impact the demand for GLP-1 devices
Expect Eli Lilly’s Oral GLP to be more successful vs Injectables

To put it plainly, the GLP-1 market looks like it’s heading for a crowded race. While some companies might enjoy a head start of about six months to a year, especially with injectable products, a flood of competitors – from those who fill and finish vials to the API manufacturers like Divis – will likely jump in.

When it comes to Eli Lilly, their oral GLP-1 drug might fare better commercially than injectables due to the convenience of oral dosing, assuming the side effect and efficacy profiles are similar

for the manufacturers – the Divis, Onesource, Shaily, and others banking on the GLP-1 market – I wouldn’t hold high hopes for long-term gains. In pharmaceutical manufacturing, profitability isn’t driven by demand, but by the supply. Even with high demand, if the supply significantly outweighs it, no one makes good money. And that’s the scenario I foresee with GLP-1.

Think back to 2011 with Atorvastatin (Lipitor), a $14 billion blockbuster drug. Only a few players like Divis, Dr. Reddy’s, Ranbaxy, and Teva made decent money for about six months before the market became flooded and profits dried up for everyone else. I expect a similar pattern with GLP-1.

The sheer number of companies entering this space suggests that supply will inevitably exceed demand. This isn’t a new phenomenon; we’ve seen it happen repeatedly in the past two decades with other multi-billion-dollar drugs like Aripiprazole, Pantoprazole, Atorvastatin, and Rosuvastatin. Initially, generic players see some contribution to their earnings, but eventually, these opportunities fade. We’re even witnessing this with Revlimid now. Look at Natco’s recent performance – it’s just the nature of the game. You can’t sustain high profits in these massive drug markets because so many companies are vying for a piece of the pie, leading to intense competition where ultimately, no one makes significant money in the long run

manoopatil · May 5, 2025, 4:58pm

One source declared Q4’FY25 results.

Press Release - here

Investor Presentation - here

The most important and interesting part for me about the annoucement of $100 Mn.(~860 Cr.) capex and that coming onstream with FY26 (even though at the later part). The aim of asset turnover to reach 3x is important number. Looks like exciting 12-18 months for strong business momentum.

Disc-Invested

Manu_Singh · May 8, 2025, 6:40am

a lot of companies can make oral but fewer would be able to produce pre filled syringe. so its negative.

Manoj_Pradhan · June 3, 2025, 7:33pm

HC bars Dr Reddy’s, OneSource from selling Wegovy’s key element in India

Delhi High Court bars Dr Reddy’s and OneSource from selling semaglutide in India, supporting Novo Nordisk’s patent rights as it fast-tracks Wegovy launch amid growing obesity drug demand

https://www.business-standard.com/companies/news/dr-reddy-s-onesource-wegovy-drug-sale-india-125053100404_1.html

rupeshtatiya · October 10, 2025, 6:58am

Few comments based on how things stand today -
(Based on some conferences companies attended, export data, industry scuttlebutt etc.)

STRIDES

With Trump making it clear that there will be no tariffs on Generics under section 232, I think one of the biggest sources of uncertainty is gone.
1/3rd of the US sales comes from Endo Operations, from Chestnut Ridge site in the USA.
The company has the capability to make controlled substances C1/C2 which can only be made in the US. Currently the contribution is low, but company expects the contribution to go to 25-30mn$ in the near term. For reference, Senores also does controlled substances in the US, Sun Pharma also does controlled substances in the US. Sun Chattem is DEA facility which manufactures controlled substances. It did sales of 690 cr and PBT of 234cr in FY25.

The company had OCF of ~ 700cr in FY24 and FY25 and does not have large capex plan. It looks inevitable that there will be debt reduction to the tune of 300-400cr in each of FY26 and FY27.
Company is looking to enter into 505b2, nasal sprays, patches, films etc. We still need to work on finding the products that company is working on, but my hope is that these products will have higher than company average margins.
Company maintains 400mn$ sales in the US by FY28 from existing products and newer products will contribute towards sales beyond 400mn$. EU is at 160mn$ sales and hopefully will grow faster than company average to go to 350-400mn$ in sales in FY28.

ONESOURCE

OneSource is going to merge Poland site of SteriScience and Brooks SteriScience site into the existing company. This was one of the questions I had in my mind when OneSource merger was announced. It is good to see that all of injectable businesses of promoter are in a single company. Now coming to valuations, the combined valuations of the two businesses is 625mn$ (roughly 5500cr). Revenue of 107mn$ and EBITDA of 39mn$ for the combined assets for the FY27. I would have liked the business to be valued on FY26 numbers and maybe at equity valuation of 4000cr. Let us hope these things sort themselves out in the broader scheme of things.

A few months ago, there was a pharma packaging conference that I managed to attend - BD was one of the attendants. Using the insights from the conference combined with export data, I have made following inferences

There are two parts of fill finish story - one is cartridge or PFS filling and other is pen assembly. Cartridge filling part has a few players in it like OneSource, Gland Pharma, Kemwell etc. But there are very few players for pen assembly. OneSource is ahead in pen assembly by a decent margin.
There are a few vendors who develop pen assembling lines like IMA, Mikron etc. Fill finish players (and pen manufacturers) have to work with these vendors to develop lines specific for each pen. For a new platform, it takes several iterations back and forth to get the optimised line running at decent speed. OneSource started developing these lines starting 2018 for various platforms and has a decent lead. Obviously, being a first mover, it took OneSource ~3 years to get the line correct. The ramp up time for the newer players will be lesser to get these pen assembly lines.
It seems like OneSource has 5 lines in the existing 40mn capacity. Roughly these lines are split as follows - 1 for BD, 1 for Shaily (Harmony/Neo), 1 for largest European generic player, 1 for spanish regional player and 1 for newer customers.
Based on export data, it looks like largest generic player based out of Europe is using BD device for Semaglutide and OneSource might be the fill finish partner.
Based on export data, it looks like Spanish mid-sized generic player is using Nemera device and OneSource is the fill finish partner. This Spanish player has good regional presence in the Latin America - having offices in Chile, Peru, Colombia, Mexico etc.
For Semaglutide, Hyderabad based large generic player is using Shaily devices (Harmony/Neo) and fill finish partner is OneSource.
For Semaglutide, Hyderabad based small R&D company is using Shaily device (Neo?) and it has been out-licensed to largest Canadian generic company. I do not know the fill finish partner.
For Semaglutide, the dosages are gradually ramped up like 0.25mn, 0.5mn, 0.75mg…1mg..3mg. So, you need a pen which can support 8 different dosages or 8 different pens. Most people will use 1 pen and will change the labels.
BD has 100mn capacity in the Europe and everything is imported into India.
For BD, they do supply cartridges/PFS as well. BD Hypak is the brand name of the product that will be used in most of these products.
In India, to launch Semaglutide, clinical trials are needed.
Hyderbad based pharma company which claims FTF in Semaglutide might be using Chinese device from Hufeng. It does not look like this company will have a big business in Canada/LatAm/India.

Finally, realization for fill finish is the biggest question mark. I have gotten widely varying numbers from 2$ to 5$. We will find out only when results are being reported from these players. I am hopeful that by Q3/Q4 or latest by Q1 FY27 - we will hit 10mn quarterly fill finish run rate on the existing capacity of 40mn.

The biggest risk or monitorable is really regulatory approvals in Canada/Brazil/India etc. As approvals start trickling in, a lot of things will become clear.

Two interesting items from the annual report of the OneSource -

Above image shows photos of various platforms supported by them. For the enterprising people, it can reveal a lot :).

The company is planning 100mn$ of capex in the next 2 years and it is quite encouraging to see customer advances worth 228cr (almost 25% of the planned capex).

Disc - I am invested in both Strides and OneSource, no transactions for the last 60 days. This is not a buy/sell reco. I am not a registered investment advisor. Please do your due diligence.