Source : 'Scrip Intelligence'
Adopting a strategy that lives up to the tagline ‘Reset, Resurgent’ that its investor presentations begins with, Strides Pharma Science Ltd. plans to repurpose some existing medicines for COVID-19 while counting on new products to fill the gap in revenues left by ranitidine after its withdrawal from the US market this April post a request by the US Food and Drug Administration (FDA).
During the fourth quarter to March, Strides reported marginally higher consolidated revenues of INR6.36bn ($83.8m) versus INR6.33bn for the same period in FY2019. After reporting an exceptional item of INR1.13bn due to a write-down of inventory and other expenses related to the recall of ranitidine, one of its top five products, it reported a net loss of INR2.06bn compared to a profit of INR447m.
Improved market share for its existing portfolio, product launches from a basket of approved ones and exploring more market opportunities should help the company achieve a 25-30% growth in FY2021 US revenues compared with $192m in FY2020 adjusted for ranitidine, company officials said on a post-earnings call. ("Ranitidine Blow Sees Indian Firms Take Different Paths" "Scrip" )
While COVID-19 hasn’t caused a major business disruption so far, Strides has decided to conserve cash in FY2021, perhaps the reason why it is adopting a wait and watch attitude for antiviral drugs in its portfolio that could be redirected to treat COVID-19, but will require expenditure on clinical trials.
The company’s presentation referred to the likelihood of several antiviral drugs being repurposed in FY21, but Strides founder and non-executive chairman Arun Kumar noted that several countries are creating their own protocols. “Repurposed drugs are all up in the air. We have a whole basket of products…we are ready with everything, but it depends upon which country, what protocols, what's the next wave looking like? So, we can’t give you a definitive color on the opportunity around repurposed drugs,” Kumar said in response to an analyst's query on the earnings call.
At the same time, after beginning exports of favipiravir to Gulf countries, the company is now planning to begin bioequivalence studies in India for the molecule. Strides said the Drugs Controller General of India had granted approval for “conducting human studies….our approval is for carrying out bio-equivalence study to the innovator product Avigan”. The influenza antiviral drug was originally developed by Japan's Fujifilm Toyama Chemical Co. Ltd..
Favipiravir has found favor with Indian authorities. While assessing redirected drugs/drug combinations to treat the disease, a government task force for the repurposing of drugs showed favipiravir and immuno-modulator tocilizumab leading the race.
Zhang Xinmin, an official at China’s Ministry of Science and Technology, said in March that favipiravir was effective in treating COVID-19 patients at hospitals in Wuhan and Shenzhen. Avigan is being clinically tested in Japan for use in COVID-19 and has already been use in around 2,000 COVID-19 cases in Japan, with reports that it has shown effectiveness.
Another Indian company, Glenmark Pharmaceuticals Ltd., has already initiated Phase-III randomized clinical trials of favipiravir on 150 patients displaying mild to moderate symptoms of COVID-19. Conducted at over 10 hospitals in India, the study is expected to be completed by August.
While COVID-19 presents opportunities, it also presents operational challenges. However, Strides didn’t see any significant impact, except a depletion in stocks, during the fourth quarter and expects a promising performance in FY2021, said R Ananthanarayanan, managing director and CEO.
A “people first” approach, adherence to all government and health aid authority guidelines and other efforts have helped to keep the company running.
“Our team has chartered a business continuity plan... we stay focused on conserving capital and identified austerity measures, along with many areas for improvement. We've maintained our agility and responsiveness to emerging trends….even though uncertainty exists in the magnitude and impact of the COVID-19 outbreak, we strongly believe that our businesses are well positioned to deal with this,” he added.
An indirect fallout of COVID-19 is the possibility of donor spends on anti-HIV and anti-malarial programs being impacted, company officials said.
While the company is poised to achieve planned outcomes on the ARV (antiretroviral) and malarial business, macro factors including the outbreak of Covid-19 could result in a reduced focus/donor pool for ARV, malaria and other infectious diseases.
“It will be fair to assume that 80% of the business will have a very solid growth, profitability and cash flow.The lockdown will significantly increase impacted people with tuberculosis and malaria and HIV. But I just think that the donors will be more preoccupied on COVID,” said founder Kumar.
The firm believes that if donor funding doesn't come through "the way it normally should", then there will be probably reduced allocation to all companies, but maintained that these are still early days.
Given these unpredictable headwinds, Strides plans to introduce around 15 new products across different markets, at least five of which will be in the US.
During the third quarter, six products had been launched, delivering revenues of about $20m in FY2020. “These products have an annualized revenue of about $45m which we will clearly realize in FY21. We have a basket of about 35 products that are approved but not commercialized. We also expect a significant ramp-up in the supplies under the VA (veteran affairs) program,” said Ananthanarayanan.
Strides expects 10 to 12 new product approvals in the US in FY21 and 12-15 ANDAs will be filed during this year. Over 20 new filings are expected for the other regulated markets.
On the 18 abbreviated new drug approvals (ANDAs) for the US market bought from Pharmaceutics International Ltd (PII), Kumar explained it typically takes a year for a new product to be launched after being acquired. ("Asia Deal Watch Strides Obtains 18 US ANDAs From Pharmaceutics" "Scrip" )
“For some of these products, the process was inefficient or the API (active pharmaceutical ingredient) the source was not competitive enough for us to get to our targeted margin. On the acquired ANDAs, we take approximately a year to get our supply chain right, our process corrected. And in some cases, even conduct another study if required. That's why we have a fairly long tail of uncommercialized products,” he added.
Though ranitidine was withdrawn from the US market on 31 March, the last day of FY2020, the company has reported an impact of $21m. The product accounted for $46m of sales during the year, benefiting from a relaunch in November as it remained the sole player in tablets, which was 90% of the ranitidine opportunity. ("Strides New CEO Reiterates Strategy Thrust On Execution" "Scrip" )
“The work FDA has asked us to do will take several quarters..we don’t believe ranitidine will be back in the market for at least two years. We still believe in the molecule and will continue to invest time and money to see if we can bring the product back,” said Kumar.
The fate of ranitidine hangs in balance after the US FDA requested immediate removal of ranitidine over-the-counter and prescription drugs after finding that unacceptable levels of NDMA can form during storage above room temperature or beyond expiry. However, it left the door a bit ajar when Center for Drug Evaluation and Research director Janet Woodcock said that this may be a fixable problem, and they’re open to companies demonstrating that when reformulated, their product will be stable.
In the US, Strides’ FY2020 revenues including ranitidine sales stood at $238m, 61% higher than the FY2019 figure of $150m. After accounting for the ranitidine impact, US sales were 47% higher. Other regulated markets brought in $118m compared to $81m, a 47% uptick year-on-year while the emerging markets and institutional business reported a 34% drop to $54m over $82m in FY2019.
For the full financial year, Strides reported revenues of INR28.05bn compared to INR22.19bn in FY2019. Net profit in FY2020 stood at INR305.8m versus INR3.3bn in FY2019.
By Vibha Ravi