Strides and Shasun plan merger to create big, 'de-risking' production network

Strides CEO Arun Kumar

With a string of regulatory actions against manufacturers showing the dangers of relying heavily on one production plant, India's Strides Arcolab and Shasun Pharmaceuticals plan to merge to spread the risk.

In a joint press release, the firms said the expanded manufacturing network created in the merger will result in a "significant de-risking of operations." The resulting network will consist of 12 facilities, half of which have FDA approval to supply finished dosages, active ingredients and services. Strides and Shasun plan to use the 6 plants that lack FDA approval to serve emerging markets, allowing the merged company to generate significant sales from multiple products and regions.

"Today's proposed combination with Shasun accelerates our strategy and growth prospects by creating a larger-scale, fully-integrated, leading Indian pharma company ... that will allow for ... more efficient use of our combined infrastructure," Strides' founder and CEO Arun Kumar said in a statement. For Strides, the deal is a continuation of the shift toward oral finished formulations that began with the sale of its injectables unit to Mylan ($MYL).

If the all-stock merger goes ahead, Shasun's pharma ingredients plants will support Strides' finished-dose operation, limiting the merged companies' exposure to price changes or quality failings at third parties. Analysts and investors reacted favorably to the deal, resulting in Strides' stock closing up almost 10%.

- read the press release (PDF)