Strides Pharma Science : Results Deck Q3 FY22 10 Feb 2022

Q3 and 9MFY22 Earnings

February 10, 2022

Highlights and lowlights for Q3FY22

Strides reports muted performance during Q3 FY22, course correction on track for full recovery in FY23

Gross margin compression in Q3 due to portfolio and business mix along with

increase in raw material prices for certain products

Drop in revenues and gross margins for key regulated markets now arrested

US business returns to growth after two quarters of sequential decline, Chestnut ridge integration going as per plan,

Business on track to meet our growth outlook of US$ 250m+ in FY23

Chestnut Ridge facility successfully completed an FDA inspection with 2 minor observations

Other regulated markets business delivered a steady performance during the quarter

and has now reached its previous historical peak revenues

Significant initiatives being pursued on cost control, operating leverage to play out starting FY23

driving margin improvement

Fund raising at Strides through issuance of convertible warrants to the family office of the Promoters at a

price of Rs 485 per warrant aggregating up to INR 1,940m fund raise

Stelis achieves its first ever operational breakeven in Q3FY22

Standalone operating revenue of INR 618m delivering an EBITDA of 8% at INR 50m

2

Management on business performance during Q3 FY22

In Q3FY22, while we have delivered an 8% sequential revenue growth for our business,		Revenues Mix
operating leverage continues to be subdued.
Our US business has returned to growth after two quarters of decline, growing 13%
QoQ to $38m in Q3FY22. We completed the acquisition of Chestnut ridge site in the
US during the quarter and the integration is on track. Chestnut Ridge facility also			10%
completed a successful FDA inspection that ended on February 8, 2022 with 2 minor
observations. While the site contributed to revenues only for a few days during the		17%		36%
quarter, the plant related operating cost were part of our P&L starting October'21		% of
leading to some level of negative operating leverage during the quarter. We expect
		Q3 FY22
the growth momentum in the US to pick up in coming quarters driven by new product
		Revenues
launches from the combined portfolio.
Our performance in the other regulated markets continues to be steady and we are			37%
seeing healthy traction across our key markets. We continue to focus on expanding
our product offering in these markets to drive the next leg of growth. The emerging
markets performance during the quarter was driven by our institutional business with
healthy procurement from our partners.	US	Other Reg Mkts	Institutional	Africa
Our cost initiatives have started yielding results and we have witnessed improvements
in our base cost structures QoQ. As we further scale our businesses across regions, we
expect improvement in operating leverage in coming quarters.

Revenues EBITDA

₹7,968m ₹40m

Dr. R Ananthanarayanan

Managing Director & CEO

3

Financial performance in Q3 and 9M FY22 results

REVENUES

GROSS MARGINS

EBITDA

ADJ. PAT1,2 ADJ. EPS1,2

Q3FY22

Q2FY22

Q3FY21

QoQ%

YoY%

9MFY22

9MFY21

YoY %

₹7,968m

₹7,360m

₹8,375m

8%

- 5%

₹22,247m

₹24,193m

- 8%

₹3,957m

₹4,113m

₹4,869m

-4%

- 19%

₹11,499m

₹14,580m

- 21%

49.7%

55.9%

58.1%

-620 bps

- 840 bps

51.7%

60.3%

- 860 bps

₹10m

₹1,661m

₹40m

- ₹418

₹4,895m

0.5%

0.1%

19.8%

-1.9%

20.2%

- ₹847m

₹758m

- ₹870m

-₹2,500m

₹2,329m

- ₹9.4

₹8.5

- ₹9.7

-₹27.8

₹26.0

	,	Adj PAT and Adj EPS for Q2 FY22 excludes exceptional items loss of ₹599m, Biotech and CHC share of	loss of ₹234m
	1.
4	2.	Adj PAT and Adj EPS for Q3 FY22 excludes exceptional items loss of ₹154m, Biotech and CHC share of	loss of ₹243m

Regulated Markets

Market	Q3FY22	Q2FY22	Q3FY21	QoQ%	YoY%	9MFY22 9MFY21	YoY%
US	2,831	2,502	3,876	13%	-27%	8,349	11,661	- 28%
Other Reg	2,990	2,825	2,981	6%	0%	8,047	7,973	1%
Total	5,821	5,327	6,857	9%	- 15%	16,396	19,634	- 16%

Emerging Markets

Market	Q3FY22	Q2FY22	Q3FY21	QoQ%	YoY%	9MFY22 9MFY21	YoY%
Inst. Biz	1,388	1,113	878	25%	58%	3,471	2,390	45%
Africa	760	920	640	-17%	19%	2,381	2,169	10%
Total	2,148	2,033	1,518	6%	41%	5,852	4,559	28%

Consolidated Group Revenues

	Q3FY22	Q2FY22	Q3FY21	QoQ%	YoY%	9MFY22 9MFY21	YoY%
Total	7,968	7,360	8,375	8%	- 5%	22,247 24,193	-8%

5

Performance Overview - Q3 and 9M FY22

Key Updates

Regulated Markets

US

• US revenues at $38m for Q3FY22 up from $34m in Q2FY22, US contributed 36% of consolidated revenues in Q3FY22

• US business returned to sequential growth on the back of new contract wins, Q3FY22 revenues up 13% QoQ

• Retained volume market share for key base molecules, pricing environment stabilizing now

Other Regulated Markets

• Other regulated markets revenues at $40m for Q3FY22 versus $38m in Q2FY22, Other regulated markets contributed 37% of consolidated revenues in Q3FY22

• Witnessed steady performance across all our key markets during the quarter despite high omicron case load, growth momentum to continue driven by portfolio expansion

Emerging Markets

• Emerging markets revenues at $29m for Q3FY22 versus $28m in Q2FY22, business contributed 27% of consolidated revenues in Q3FY22
• Growth in emerging markets business was driven by institutional business that benefitted from a healthy customer offtake
• Africa business declined during the quarter owing to several countries' having high covid incidence impacting demand

Operating Cost

• Operating cost for the current quarter includes impact of Chestnut ridge site starting Oct'21
• While the freight rates continue to stay elevated versus historical levels, a superior supply chain execution has enabled a shift towards higher sea shipments helping contain our logistics cost QoQ
• Logistics cost during the quarter was at ₹606m versus ₹897m in Q2FY22 and ₹461m in Q3FY21
• Our cost initiatives have started yielding results and will drive operating leverage in coming quarters

R&D Investments

• R&D investment in Q3FY22 at ₹240m