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2023-10-31| Asia-PacificM&A

Strides Pharma to Sell Manufacturing Facility in Cost Optimization Move

by Sinead Huang
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Strides Pharma Science Limited, an Indian pharmaceutical company headquartered at Bangalore in southern India, has unveiled its latest strategic move towards cost optimization and network restructuring. In the recent announcement, Strides revealed its binding agreement with Rxilient Biohub Pte. Ltd. for the sale of a Singapore-based manufacturing facility, as part of a broader effort to streamline operations and enhance efficiency.

Related article: Partnership to Manufacture Antibiotic to Combat Antimicrobial Resistance

A Strategy for Cost Optimization

The decision to divest the Singapore manufacturing facility stems from Strides’ commitment to optimizing its manufacturing network, a process initiated last year. This effort follows the successful acquisition and integration of the Chestnut Ridge manufacturing site in the United States, rendering the Singapore site redundant in Strides’ global network. While the Singapore facility has played a valuable role in the past, the company has determined that its closure aligns with the broader objective of enhancing cost-effectiveness.

Strides Pharma’s management and investors anticipate an immediate boost to earnings per share (EPS) following the transaction, with a projected reduction of approximately $9 million (equivalent to ₹750 million) in annual costs. Importantly, this divestiture is expected to have no adverse impact on the company’s revenues.

Transaction Details and Closing Expectations

Under the terms of the agreement, Strides Pharma will transfer the manufacturing facility, along with associated licenses, equipment, vendor contracts, and other assets, to Rxilient Biohub for a total cash consideration of $15 million. In addition to these assets, Rxilient Biohub will assume the long-term lease obligations related to the site. This transaction is a pivotal step in finalizing Strides’ manufacturing network optimization efforts, which have been a central focus of the company’s strategy for the fiscal year 2023.

The culmination of these efforts has resulted in a transaction that is expected to be concluded in the third quarter of fiscal year 2024. This timeline is contingent upon obtaining necessary approvals and fulfilling customary and other closing conditions. 

Once the transaction is complete, the proceeds will be allocated towards debt reduction, reinforcing Strides Pharma’s financial stability. As Strides Pharma embarks on the sale of its Singapore manufacturing facility, it positions itself for a leaner, more cost-efficient future. This strategic move reflects the company’s commitment to achieving greater profitability and operational efficiency.

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