Strides Pharma Science Limited (STAR) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Strides Pharma Science Limited Investor Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Abhishek. Thank you, and over to you, sir.

A very good evening, and thank you for joining us today for Strides' Investor Call. Today, we have with us, Arun, Founder, Executive Chairperson and Managing Director; Badree, Executive Director Finance & Group CFO; and Neeraj Sharma, CEO Designate for OneSource. Please note that today's discussion may be forward-looking in nature and must be viewed in relation to the risks pertaining to our business. After the end of this call, in case you have any further questions, please feel free to reach out to the Investor Relations team. I now hand over this call to Arun to make the opening comments.

Thank you, Abhishek, and thank you, friends, for joining in this late in the day. Appreciate your time. It's been busy several weeks. In the last earnings call, we did announce that we will come back to investors with the design for our CDMO division, which we have today. We have a detailed presentation that is available. But I will also use this opportunity to introduce Neeraj who then will give more details about himself, who is joining this call today, Neeraj has been at Steriscience & Injectable's CDMO division, and he is the CEO designate for this new company. So it will be important for you to hear his perspectives and also ask him questions that you may have. Before I start -- before I do that, quickly, what we have done today is, we believe, a significant unlock of value, value for Strides' shareholders. We have, of course, reset Strides since our April '22 clarion call that we'd get back the company to shape, which we have done. I'm delighted in the last quarter to have announced significant improvements across the board in terms of reporting our highest EBITDA, meeting our debt reduction target, gross margins reaching historical peak. And there were some parts of our business which have niggles which needed to get sorted, which we have. There are few more things that we're working on. But I'm also now more confident to reaffirm our guidance that we provided for the company as a whole in terms of its EBITDA outlook between INR 700 crores and INR 750 crores. And also now more than enough confident to confirm our debt reductions will track to our guidance of under 3.0 in FY '24. We actually mentioned exit run rate FY '24, but now we are more and more confident it will be on absolute FY '24. The core business will grow significantly. What we have done and we'll discuss that in more details is that we have moved all our technologies and our high-end CDMO businesses under the new platform OneSource. This includes our soft gelatin business, which is currently embedded in Strides and it gets the valuation of a generic company. We are amongst the Top 7 or 8 Rx-only soft gelatin players worldwide with almost every single product approved and having dominant positions, and that's a very significant B2B part of our business. And ever since we announced our intentions to be a CDMO, we have started onboarding several customers in our soft gelatin business, which we would not under normal circumstances. And I'm delighted that the fairness opinions and the valuations track the value of that business at around 17x, which is a 60% to 70% premium to where we currently trade. So I'm also delighted that we are positioning ourselves truly as India's first specialty pharma CDMO. This covers biologics, drug device combinations. We are one of the few players in this space. We'll talk a little more about it when we come to specifics, but also complex injectables, our erstwhile B2B business of Agila is now part of this -- CDMO part of the business. And we believe that this will result in not only unlocking value, but will create the kind of attention and focus the 2 businesses would need to live its own lives. I'm also pleased to say that Stelis has been reset post several mishaps at Stelis. The last 12 months has been historic in terms of how we've brought the company back to shape, including on -- post our FDA approval, we now have 15 unique customers in our Biologics business. In the last 5 months, we have contracted more Master Services Agreements than we did in 4 years, and we have now started commercial sales from that site, including 2 FDA inspections, which makes us one of the few pure-play biologics company with fully integrated Fill-finish and biologics drug substance and microbial plus added to now with our injectables business and our oral technologies and softgels. It's very important and pertinent to note that we are not in API CDMO or CMO activities, neither are we in oral dosage forms because we believe that is not the -- that is not what we want to focus on. We believe the high CapEx long gestation story has played out well for Strides Group in the past. And having completed a large phase of that journey, we only believe that it will magnify further as we build out OneSource. So, OneSource -- so, eventually, we also announced that we signed up a binding term sheet to sell our third plant to Syngene for INR 705-odd crores, which is what we invested in that plant. We have subsequently converted that transaction into a business transfer agreement and we're in the last phase of completing our CPs and as both companies have announced, we believe that in Q3, we will complete the transaction. This will correspondingly -- this will lead in an immediate debt reduction at Stelis from a peak of INR 1,400 crore to what it is now at around INR 900 crores, and it'll come down to about INR 350 crores of net debt. Correspondingly, Strides' guarantees which at the peak had been INR 1,100 crores, for which most of our investors and shareholders were supportive and recently approved us issuing fresh guarantees. Nonetheless, I'm also pleased to say those corresponding guarantees will fall off, leaving those guarantees to be under INR 350 crores and further reducing by the time the NCLT process is completed. Considering that this transaction has got significant related-party matters, it was pertinent for us to be about cautious. So the whole transaction was supervised and managed by an independent group of directors. We work with marquee names. We had Transaction Square as an adviser to this program. Although regulations require us only to have 1 valuation, we had valuation reports from both PwC and Grant Thornton. Additionally, we did financial & tax VDD and valuation exercises from PwC and our legal partners in this was DSK Legal. [Technical Difficulty]

Ladies and gentlemen, please stay connected, the line for the management dropped. Participants, please stay connected while we rejoin the management back to the call. Ladies and gentlemen, thank you for your patience. We have the line from the management reconnected. Sir, you may go ahead.

Sorry, I didn't know that we've lost you. But I was basically saying that we've used marquee names to ensure that everything was done [ with caution ]. And the fairness opinion was issued by Jefferies and the valuation reports by Grant Thornton and PwC, although it was only mandatory for us to bring in 1 valuation. Transaction Square was our adviser and DSK Legal was our legal advisers and complete the legalities of the companies. All this results in a very significant outcome for Strides' shareholders. And considering that it is very important that we get the best outcomes for Strides' shareholders, it's important that we take a little -- a few minutes to understand that better. One is that we have unlocked close to about 200 and -- we have unlocked close to about INR 2,400 crores of equity value in soft gelatin, 100% of that staying with Strides shareholders. When it comes to SteriScience, the trading multiples are approximately 15% discount, discounted to peers and in the case of Stelis, based on our -- on the NPV model of our contracts in hand, we have announced that we now have close to about $600 million of sales contracts in Stelis starting from '26 to '32. And we only see that book increasing. So based on a DCF methodology and different weightages both valuers and the fairness opinion makers have, we have secured a fairly reasonable valuation for Stelis too, although the company is just about in its breakeven phase. Strides shareholders will get 44% of the economics of OneSource. This translates to approximately an implied value of INR 364 per share of Strides. And I'm sure if you adjust for the -- if you adjust for the Stelis multiples because it's just a breakeven company, but the fact that we have invested over $200 million in capabilities there, this -- you will see that the incoming EBITDA adjusted for Stelis is over 30%. Historically, our soft gelatin business delivers this kind of business. Historically, our injectables business has always delivered margins of these levels when we used to own and operate Agila. So, we're delighted that we are creating a business adjusted for Stelis is already in the 30% of EBITDA with significant free cash generation. What this also does is that we bring debt to a very reasonable level in both our companies, about $35 million or INR 300 crores of debt gets pushed down from Strides to OneSource, reducing the debt-to-EBITDA ratios in Strides to about 2.5x. And with free cash generation, we expect that to be -- that to accelerate even further, going down rather, going forward in the next 1 year. PR Insights also guided that we would take away INR 500 crores of revenues from Strides and about INR 150 crores of EBITDA. We have taken the liberty of guiding long range, saying that our FY '25 numbers will not be lower than what we do today, which effectively means INR 4,000 crores of sales and not less than INR 700 crores to INR 750 crores of EBITDA. I can err on the side of caution, I mean, on the side of optimism on revenues but not on the margins. So, with that, I think that we have solved for the challenges the group face, which as you'd recall, went through difficulties for the first time in its history, but we all remember the blemishes and we are delighted that we are now coming on stronger from this very difficult situation that we went through in the last 2 years, especially during COVID. Promoters have invested close to about INR 1,000 crores between -- about INR 850 crores between Stelis and the other companies that comes into this program. And consequently, the shareholding of the promoters move up from 30% to 39%, which reflects the value of the capital that we have invested. We also have a very strong professional management. As you know, that post Agila and our non-compete, we have most of our senior leadership back as a Group, and we are delighted to have all of them running the new ship. And I'm sure that the new company will deliver significant value for our stakeholders. We expect this process in terms of an NCLT to be completed in approximately 12 to 15 months, given the nature of such transactions. And we hope that the net result of this would be an outstanding outcome for all our shareholders, both in the parent and the new core that is created out of this. This also brings to conclusion my own commitment to my significant stakeholders that not only will the family come back to run the business but will stay invested, but also, therefore, it was very critical that we align our interest in the Group. Now I must also be honest in saying that not all of our businesses have started to be aligned into Group because if we do that, it will be very dilutive to Strides shareholders. But over time, as valuations increase for both these companies, we will always consider, subject to shareholder approvals and being reasonable to combine all our interest under one factor. But at this time, we don't have any competing businesses with these 2 -- the platforms that we have created. And I'm happy we have reached here at this stage in a relatively quick time. And I will now -- we have a very detailed deck, which includes shareholding pattern, the contours of each of the businesses, what we are doing, and I can also tell you that we have a very strong H2 across the company, including this platform. So, we're very confident of meeting both our guidances of the platform EBITDA and also the products company, which is Strides Pharma. Most importantly, I can also assure you that both the Injectables business and the soft gelatin book is quite full for the next year. So we don't have to scramble for any new business to meet our guidance of $180 million to $200 million. The reason why the range is $180 million to $200 million is more to do with Stelis because it depends upon how quickly our partners get approvals, but we expect Stelis to add $5 million to $6 million of EBITDA in FY '25, but we have also guided in this document that we see this business doubling in 3 to 4 years, and that's mainly because of our leadership position in drug device combinations. We have now about 14 customers in our GLP-1 programs. And I'm also pleased to let you know that for many of the first-to-file players in the U.S. and various other markets, we are their preferred or sometimes sole supplier. So we are excited to partner with our global partners. We have now added Top 10 big pharma in our Group as customers, and I'm excited to be extremely confident about where this CDMO will not only be differentiated, but a very different quality of business. The biologics works on a significantly higher gross margin and EBITDA as is the case globally. What this also does for the benefit of our investors is that there are only 2 unique companies in the world which offers -- of course, they are much bigger and do a lot more than us. But the only 2 unique companies that offer soft gelatin capsules, biologics, injectables and drug device combinations, are Thermo Fisher and -- which is erstwhile the Patheon part of Thermo Fisher and also Caplin. Of course, Caplin has its own challenges as all of us know. But I'm just giving these 2 names as comparison as you will not have a peer comparison in the Indian ecosystem for CDMOs. I know this has been a slightly longish opening statement, and I'm sure you guys are getting used to it. Let me now hand over the line to Neeraj for him to make his introduction. And after that, we'll open the house for questions. My colleague, Badree, who's our Group CFO and I'm here and along with Neeraj will address your queries. We are hoping that this will -- this meet will mainly address questions related to the deal that we have announced. Appreciate that. Thank you, Neeraj.

Hi. Thank you, everyone, for listening in. So it's a real privilege for me to introduce myself and OneSource, which is, as Arun mentioned, going to be India's first specialty pharma CDMO. So a little bit about myself. I have spent 28 years building and running businesses globally across multiple geographies. I started with India, then moved to Southeast Asia, Latin America and now in Europe, where I am based for the last 17 years. In fact, the businesses which I have led have not only been across new regions and geographies but also across all stages of evolution, starting up or scaling them up, turning around and even post-merger integration. So that -- with all this, I have, I can say, a complete 360-degree view of the pharma value chain. Having spent large part of my 28 years with Ranbaxy and then with Sun, I joined SteriScience as its CEO about 2.5 years back, as Arun mentioned, to build our specialty injectables business. In fact, with a very strong legacy of Agila, it's very formidable experience, expertise in Sterile Injectables and most of the same exceptional team, which built Agila, we have been building SteriScience as Agila 2.0. And building it at a breakneck speed, as you would expect from a company run by the Group. This was a little bit about myself and now about OneSource. So I personally have been always very keen to run our technology-led CDMO. And I strongly believe that pharma outsourcing to a specialized company like ours will continue its growth trajectory well into the next decade. In fact, that's why I'm hugely excited to lead India's first specialty pharma CDMO, OneSource will have its, as its growth engine, 2 of the fastest-growing trailblazers, as Arun already mentioned those. One is biologicals and the second as GLP-1, which as you may know already that the new medical therapy for diabetes and weight loss and so on and so on as new things keep coming up with GLPs, where Stelis already has a significant presence and we are set to emerge as a very dominant CDMO. Add to these, the complex injectables and the high-tech softgels, I think will make up our complete offering immensely attractive to both our current as well as new customers. I would just like to talk now a little bit about the company in some deals. Arun has mentioned many of these points, but I'll just give you a summary. So while the venture is new, it's 3 individual parts as you know are already successfully operating. And we are set to deliver about anywhere between EUR 140 million to EUR 150 million of revenue in the current year FY '24. And Arun also mentioned that thanks to some of the recently signed contracts which we have, including actual customer forecast and a very strong large funnel, we see this business growing anywhere between 20% to 25% year-on-year over the next many years. We have a significant number of customers already in place for our GMP, with almost INR 350 million forecast of sales coming from them just for their first 3 years. And very strong margins, especially in these complex drug device combinations as well as the synergies coming from the merger of the 3 individual businesses will drive our EBITDA from current about 25% to up to 35% in the next 2 to 3 years. And obviously, you know that we've got all our sites FDA approved, which will continue to open many more doors for us in the largest outsourcing market in the world, which is the U.S. So when it comes to our capacity, where you see not only do we have currently some of the industry-leading capacities in many areas. But as you all know that we also have an unparalleled record of expanding capacity as and when these are needed. So, just to close, with our proven capability and large and dedicated team, OneSource is all set to be a specialty CDMO force to reckon with in this industry. Thank you very much. Over to Arun.

Thanks. Thanks Neeraj.

Nirav, we are good to open for questions.

[Operator Instructions] The first question is from the line of Abdulkader from ICICI Securities.

Sir, my first question is in terms of, when you talk about the different line of businesses, with the combined entity now, could you help us understand what would be the contribution from a top line perspective for all the 3 business units? And between biologics and [indiscernible] what would be the revenue contribution going up in the next 3, 4 years?

So, we are not giving long-term guidance. We have given an FY '24 guidance, which is there. The pro forma numbers are there in our debt, which is $145 million with 25% EBITDA. And we have guided that in FY '25, this will grow to approximately $200 million with 30% EBITDA.

All right, okay. And my second question is, if I look at the current revenue that is FY '23 revenues of the soft gelatins and SteriScience. So that range is almost at I think $30 million to $40 million each. So do we expect that to go up to $60 million, $65 million in the next year. I mean -- so just wanted to understand if this should be a result of some intersegment revenues, what Strides had been sourcing from OneSource entity now or this would be a normal course of business, which is coming from some [ noteworthy ] customers?

No. So just to make corrections to your understanding, the $65 million and $60 million that you're referring to are actually this financial year, and we are tracking to achieve those numbers without a problem, okay? So we are guiding you and we're tracking those numbers without a problem. Now, these businesses in -- the soft gelatin business of $65 million currently in FY '24 will sit within the Strides' numbers because the NCLT process will only be done in FY '25, and the effective date is 1st April 2024. So there will be no change or no transfer of revenues from Strides into this until the company is formed. We are -- the growth for us is coming from new customers that we have added, including we just received a product approval, which is, like any CDMO goes to one of the largest generic companies in the USA, which we announced on Friday, that is also a typical CDMO model So, new growth will come from those kind of programs that we have.

Sure, sure. And so, would it be possible to share the...

Abdul, if you don't mind, can you please come back on the queue. There are too many questions.

Alright, sir. Sure.

Next question is from the line of Nitin Agarwal from DAM Capital.

Congratulations to the team for this transaction. Arun, on the GLP-1 contracts that you've referred -- referenced to a few times in the conversations, can you give us a little more color on by when do these businesses start? And are they're all generic businesses we talking about?

Yes. I mean, obviously, we are -- currently, all the GLPs are under patent, and they go off patents from '24 with critical patents getting off on the main drugs in '26 and from '26 to '32 and then the newer ones up to '37. But as a CDMO, we work on all the 3 products based on what our partners think are the opportunities for them to litigate, to fight patents, to win settlements. So we currently are working with, on all the 3 GLPs. So the combined GLP business, if I'm not mistaken, now is a little over $25 billion, $30 billion range and growing rapidly. But we do all the 3 GLPs because all of them are drug device combinations. And we are very strong in drug device combinations because we have got very solid investments in devices, and we are a leading device -- drug device player globally, if I may.

And secondly, on the biologics business. Obviously, this business is starting out. You've talked about the contracts that you've signed up. But if you take a slightly more 3,4 -- 3,5 year view of the business qualitatively, how do you see this business evolving, and what strength do we carry in this business?

Typically, from a -- Nitin, from an MSA to the CSA, which is a commercial sales agreement, the process can be as low as 2 years to as high as 10 years. So you need an array of businesses, customers and programs that ensures that we have a very solid order book. In our case, we just got FDA approvals now for the plant, and most of the products are still under patent. So the capacity utilization moves up significantly only once we get these products commercial, which starts from '25 to some extent on some of the products like liraglutide whereas the semaglutides, the Wegovy and Ozempic, the patents in different countries have got a range, a big range. But the fact of the matter is that there are not many players doing that. But we also, if you recall, announced in our last transaction that we have signed our largest biologics drug substance deal in the last quarter. So we continuously add contracts. But when -- the OpEx leverage flows through only when the CSA, the commercial sales agreements reach a high level of maturity, which will happen in the next 2 to 3 years. That is why we have guided in these documents today that we have no challenges in seeing this business doubling from the $200 million that we will do in FY '25 when the scheme is completed in less than 3 to 4 years. And all of that will come from or a lot of it will come from the growth in the Biologics division. And that's why we've also upped our EBITDA to 35% at that time because the OpEx leverage is significantly higher in the Biologics business.

[Operator Instructions] Next question is from the line of Sarvesh Gupta from Maximal Capital.

Just a few clarifications. So the valuation for softgel as well as SteriScience is around 17x FY '24 EBITDA. Is that the right number, sir?

Yes. You're right.

Okay. And in case of SteriScience, I mean it's not a clean merger, and we see that 99% is getting demerged. So any reason why we did not pursue a complete merger?

So from what I know, it's a clean 100% demerger, merger into the scheme. I do not know what you're referring to, but I can check and come back to you.

Okay. And sir, is there any shareholding of Strides in SteriScience as of now?

Go to the slides that we have presented. It says that -- it already shows the captives.

Okay. And finally, on the guarantees which Strides has given to Stelis. So would we [indiscernible] that once these 2 companies are separate listed companies, there would not be any guarantee from Strides towards Stelis?

Well, that's the assumption. We obviously have to -- all of this are subject to shareholders and lenders consent, but that's the assumption. But -- and that's the right thing to do, too. I am confident that we'll get there.

[Operator Instructions] Next question is from the line of [ Naitik Mohata ] from Sequel Investments.

Sir, just one question from my end. So there's a bit of confusion. I would like some clarification, what is the value addition of SteriScience that we are assuming for the entire SKU?

Sorry, what is the confusion?

What is the valuation for SteriScience that we have assumed for the entire SKU.

Naitik, sorry to interrupt you, but your voice is not coming clear. Can you speak through the handset, please?

Yes. So my question is, what is the valuation that we have assumed for the merger of SteriScience?

So, if you've got the valuation synopsis, all the valuations of all the companies are mentioned in Slide 9. I'm sorry, the slides are not numbered. If you got to the valuation synopsis, you will see that the valuation is INR 2,195 crores.

[Operator Instructions] Next question is from the line of Rohit Mundra, Individual Investor.

In one of the slides you have mentioned, our aim to grow the OneSource to almost $180 million to $200 million by a [ 25% ] 30% margin. So would we be requiring any CapEx investments to achieve the same?

No. No.

Okay. And my second question was relating to the working capital. So what was the working capital requirement for the OneSource entity given the CDMO business is a quite working capital intensive business?

Well, the CDMO business is, you're right, it's both capital intensive, but it is not so much working capital intensive. So we expect the total debt-to-EBITDA to be around 2.25x in FY '25. Half of it will be working capital and half of it will be term debt.

[Operator Instructions] The next follow-up question is from the line of Nitin Agarwal from DAM Capital.

Just following on the previous question on -- at what stage do you envisage any large capital infusion required for the OneSource business for the growth plan that you've envisaged?

So, Nitin, the business, as you would see from the numbers, it already delivers [indiscernible] adjusted for Stelis has got a very significant ability to generate free cash. And in the CDMO business, in -- at least in our model, a lot of the CapEx, especially in Biologics, it's partnered. The partner pays for most of it. So unless we are going to expand significant capacities, which we have to, especially in our drug device capabilities, we currently have only about 40 million devices that we can make. We probably need to double that or even more. But we don't need to do that now. We will do this closer to FY '27, as we think the business will generate enough free cash to do that on its own. But it will not require equity infusion into the company unless we are making very significant plans. But as we see it now, we don't see any need for any new capital in the near term. I mean not significant capital. There will be to INR 200 crores, INR 300 crores of capital even in its first phase of growth when we think we will be able to double our revenues from INR 200 crores to INR 400 crores.

And secondly, when we talk -- taking this number of -- total $400 million number for the OneSource business, obviously, the 3 main contributors as you highlighted would be the GLP-1 contract, the soft gelatin as well as the injectable business. But what about -- how do you see what growth part you see for the plane biologics business? Talk about the drug substance contract that you signed up. But...

The drug substance, you know on the drugs -- on the drug substance part both in mammalian and microbial, especially mammalian we just commissioned our facilities about 3 months ago, the 4,000-liter capacity. And we have ability to go to 8,000 liters in the same plant and for which we already have equipment. So this is a business which is very nascent for us. So we would see a lot of the ramp-up on the biologics to be closer to 2 to 3 years away. But the key to be a successful CDMO is to sign new contracts, either new biologics, a new NNV or a bio-sim. And that is what we are doing, and we have a nice funnel of customers who are keenly looking at us, especially now that we are FDA-approved on our drug product. It will be quite -- it has been quite easy to attract more customers. So there are a number of RFPs that we have issued have quite -- been quite significant in the last several months.

Including different markets and....

And last one, with this sort of -- with this restructuring now, which is done in OneSource, I mean how do you visualize the Strides business ex of soft gelatin and ex of OneSource, what -- qualitatively a 3 to 5 year period?

Well, Nitin, you've been following us for 15 years. We don't do 2 to 3-year view. We had to do this in OneSource simply to give -- because it's a completely new company and we wanted our investors to know the value of that business that we're trading. The -- for now for FY '25, we are saying that INR 500 crores revenue and INR 150 crores EBITDA that we lose to 1% Strides will be 100% recouped and there could be even growth from there. Beyond that, it's -- we should be able to get back to our historical growth because typically now more focused on bottom line growth, as you can see from our numbers and our gross margin expansion, not so much focused on top line growth, maybe 12% to 15% CAGR. But EBITDA CAGR, like I said in the last earnings call, will be significantly greater than that.

[Operator Instructions] Next question is from the line of Chetan from Pragya Equities.

Yes. I just wanted one clarification. In presentation, at one slide you wrote Strides' shareholders to participate in value discovery by holding 44% in OneSource. And in another slide, it shows that the shareholding post demerger will be 61%. So I'm little bit confused.

Yes. That is because that the 61% is the total public shareholding that includes all the shareholders of Strides, because there are other shareholders in the other 2 companies, right, Chetan.

[Operator Instructions] Next question is from the line of Rahul Mangla, an Individual Investor.

Sir, actually, I want to ask a question like there is a current debt of around INR 3,000 crores. So how is the company going to plan to reduce this debt?

So firstly, this -- the announcements we made today solves for the debt-to-EBITDA ratio because we'll also appreciate that the combined EBITDA of the 2 companies are now INR 1,200 crores, close to that. So the debt-to-EBITDA is a very comfortable situation to operate a company of this size and scale. We started off 18 months ago at 5x to 6x run rate and now we are in a very comfortable situation. There's enough free cash generation for logical debt reduction, but debt is not something we are -- we don't think there's an overhang of debt or something that we can't handle. We've mentioned that in Strides, our working capital cycle times are long, given that our business in the U.S. has a long working capital cycle time. That is reducing significantly. And for the first time last quarter, we generated free cash. We expect that to be a phenomenon during the year. I think in 2 to 3 years, you will see us, if not free cash on the main company, relatively very marginal debt.

And is there any plan for company for bringing the stock buyback program, like other companies are going through that?

No, we don't.

Thank you. Ladies and gentlemen, we'll take the last question from the line of Rahul Bohra from InCred Capital.

Hi, Arun, Praful here. Arun, can you just take us to the pipeline in each of your segments and the current portfolio, so in the soft gel, injectables and the biologics?

Yes, sure. So in our -- let's start with the biologics because we've done a lot of conversation around that. We don't have -- in biologics, it's 100% CMO/CMDO. We do -- the D part of our biologics business has more to do with work to help our partners to improve their eels or cell lines and stuff like that. We don't do much of the D because in the biologics, we add the customers who have already done a lot of work. And then we are their CMC partner mainly, because that's how the industry works. In the soft gelatin business, we have a very strong -- I mean we have, I would guess, Praful, you know us for some time, 8 out of 10 approved products globally, we already have. The other 2 may not be material, but now being a CDMO, they become material because our expanse is now the world and not what we would look at [indiscernible] of what Strides would want in territories and markets it operates. We have a very strong pipeline. Our approval for icosapent is a good example. That was the only large soft gelatin product that was not in our pipeline, not in our approved list. We do have some very nice products that are -- we are now expanding into the controlled substances and oncology space in our New York facility because we have the ability to make those products. There are a few soft gelatin which requires containment, which we don't do in India. So that expansion will happen in the next close to about a year from now, but R&D for that is already happening. So I think by end of FY '25 every single product that is approved would be in our pipeline in terms of partners or products. SteriScience is a legacy business. We have a very strong pipeline of approved products. We have about 14 ANDAs approved and we are adding more and more products into that portfolio. We expect that business to grow. We are full up on capacities for this year and next year. So this merger will also allow us to expand capacities at Stelis because it's an FDA approved site. And we already have space to add another line. Once we add another line, that will help double the SteriScience business in the next 3 to 4 years. This is a business we know very well. And it has always been a B2B business, kind of a CDMO revenue share profit modeling. We were pioneers in that model. So we're just getting back to what we did earlier, better with less number of products, but more smarter products in the marketplace.

Sure. And just a clarification Arun, the current soft gel business we do in Strides, this is a B2C business or a B2B business?

It's a combination. But more than half of it is B2B.

So, once it gets shifted to the OneSource entity, where the structure is mostly for a CDMO and a B2B kind of a business. So does it change anything for us or would it continue the way it is?

No. So Strides will continue to -- Strides will be a partner for some -- for those products that it markets. But even those products, Praful, we don't have exclusivity. If you look at IMS, on many of these opportunities, you will see market share of 60% to 70% on our own IP with 2 or 3 players, and that's a standard practice that we've been doing for long. So we have much more market share than what you see in the IMS simply because of this model that we have been adopting for softgels for a long period of time. And we're just expanding capacities from 800 million to 2.2 billion units, and that will be commercial as early as end of this year. And I can also tell you that a large part of that expanded capacity is now being consumed by the Rx OTC space, which we never used to operate earlier.

Thank you very much. I now hand the conference over to the management for closing comments.

Thank you. Thank you all. Really appreciate your time today. And as always, if you have questions, please reach out to our Investor Relations team or to Abhishek or any one of us. And we're more than happy to chat with you guys. Thank you all, and have a good evening.

Thank you very much. On behalf of Strides Pharma Science Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.