OneSource secures $95m from leading investors; Strides Pharma shareholders witness surge in embedded value

OneSource Specialty Pharma Limited, previously known as Stelis Biopharma, has received equity commitments amounting to INR 8,010 million (approximately USD 95 million) from prominent institutional investors, thereby positioning the company at a pre-money valuation of USD 1.65 billion. This strategic financial endorsement, led by HBM Healthcare Investments along with substantial contributions from WhiteOak Capital, Param Capital, and SBI Life Insurance, signifies a notable appreciation in value for shareholders of Strides Pharma Science Limited.

This latest funding by OneSource is part of a pre-listing fundraising round intended to deliver an embedded value of INR 663 per share to Strides shareholders, an 82% premium over the prior valuation of INR 364 per share, as per the Scheme of Arrangement announced in September 2023. This substantial valuation growth is indicative of heightened investor confidence in OneSource’s strategic positioning and the expanding potential of the Contract Development and Manufacturing Organisation (CDMO) sector in India. The increased valuation is reflective of OneSource’s focused growth strategy, which aims to capitalize on burgeoning global demand for sophisticated pharmaceutical solutions, particularly as the CDMO market continues to expand.

The success of this fundraising initiative precedes OneSource’s anticipated public listing in March 2025, contingent upon regulatory approvals. This pre-listing round has demonstrated OneSource’s adeptness in securing commitments from top-tier institutional investors, which is instrumental in establishing its credibility and enhancing its competitive edge in the highly contested global market. Strides Pharma Science, having amalgamated its biologics CDMO, complex injectables, and soft gelatine businesses under the OneSource brand, is strategizing to consolidate its foothold in the specialty CDMO landscape, aspiring to emerge as India’s preeminent pure-play CDMO entity. The consolidation strategy that Strides has executed is already showing tangible results, as acknowledged by numerous industry analysts who have endorsed the move as strategically sound for the company’s long-term growth trajectory.

Significant Implications for Strides Shareholders

The transaction holds substantial significance for Strides shareholders, who are expected to experience considerable gains owing to the marked escalation in the value of their holdings. OneSource’s valuation has risen by over 82% since September 2023, underscoring Strides’ overarching strategy to enhance shareholder value through the integration of its specialty pharmaceutical services. By unifying operations and bringing core business units under a single umbrella, Strides aims to optimize synergies, reduce inefficiencies, and focus more sharply on high-margin services. Such consolidation is poised to substantially enhance operational efficiency while providing shareholders with superior returns. As per the agreement, Strides shareholders will receive one share of OneSource for every two shares held in Strides, thereby amplifying their equity gains.

Arun Kumar, founder of Strides Group, and Neeraj Sharma, CEO of OneSource, expressed their elation over the robust response from investors in the pre-listing round. They emphasized that this investment round validates investors’ confidence in OneSource’s strategic direction and long-term growth prospects. They further noted that the overwhelming investor response not only underscores the quality of the business but also highlights the expansive growth potential that OneSource aims to achieve through portfolio diversification and entry into new markets. Kumar elaborated that the fresh capital would be instrumental in solidifying OneSource’s leadership in the CDMO space, with aspirations for expansion in both regulated and emerging markets.

Furthermore, Badree Komandur, Managing Director and Group CEO of Strides, remarked that the secured equity commitments ensure the sustained growth of OneSource and reflect Strides’ ongoing success in delivering value to its stakeholders. Komandur highlighted that OneSource’s strategic emphasis on the development of difficult-to-manufacture pharmaceutical products and provision of top-tier solutions has been central to attracting high-calibre investors. The fundraise is projected to unlock INR 61,000 million (around USD 725 million) in value for Strides shareholders, representing a highly lucrative return. Additionally, Komandur pointed out that the capital raised would be deployed for substantial capital expenditures, essential for expanding OneSource’s production capabilities to meet growing global demand.

Strategic Vision and Growth Trajectory for OneSource

OneSource Specialty Pharma plans to allocate the newly acquired funds towards accelerating its growth strategy, optimizing its debt structure, and financing significant capital expenditures that will underpin its order book across three core platforms: biologics CDMO, complex injectables, and oral technologies. With ambitious growth targets, the company aims to secure market leadership in the specialty CDMO segment over the next five years. As a leading specialty CDMO, OneSource is strategically positioning itself to cater to an international clientele, supported by five state-of-the-art manufacturing facilities that have received regulatory approvals from major bodies, including the USFDA and EU authorities. Expanding these facilities is expected to augment OneSource’s presence in both regulated and non-regulated markets, thereby increasing its operational capabilities and expanding its global footprint.

The consolidation undertaken under the Scheme of Arrangement merged Stelis’ biologics operations, SteriScience’s complex injectables, and Strides’ soft gelatine businesses, forming a unified specialty CDMO. This strategic move aligns with the company’s vision to deliver cutting-edge pharmaceutical products to global customers while driving operational efficiency. Following regulatory approvals from the National Company Law Tribunal (NCLT), OneSource plans to list its equity shares by March 2025. The forthcoming Initial Public Offering (IPO) is anticipated to further attract investor interest, providing additional capital for future expansion initiatives. By emphasizing specialty pharmaceutical services that necessitate advanced technological expertise, OneSource aims to establish a distinct niche within the global pharmaceutical market.

Analysts Project Robust Future Growth

Industry analysts have emphasized that OneSource’s value proposition is deeply rooted in its extensive manufacturing network and its comprehensive portfolio of specialized drugs and devices. By integrating varied competencies into a cohesive business model, OneSource has positioned itself as a formidable competitor within the CDMO sector, affording it a unique advantage. The company’s end-to-end solutions for drug-device combinations, biologics, and complex formulations place it on a path for exponential growth across both regulated and emerging markets. Analysts assert that OneSource’s extensive capabilities, along with its proven track record in manufacturing highly complex pharmaceutical products, provide a solid foundation for sustainable, long-term growth.

Furthermore, analysts have observed that securing strategic equity commitments from marquee investors positions OneSource well for its upcoming IPO. The infusion of capital will not only facilitate scaling operations but also enable the company to pursue strategic initiatives, such as expanding its product offerings and entering new geographical markets. With detailed plans to bolster capital expenditures and enhance its order book, OneSource’s growth trajectory appears exceptionally promising. The attraction of investments from top-tier institutional firms reflects market confidence in OneSource’s business model and the future potential of the CDMO sector. Moreover, the pre-listing equity raise has been viewed favorably as a prudent step, highlighting the management’s commitment to long-term profitability and growth.

Strides Pharma Science Limited, listed on both the BSE and NSE, has consistently aimed at generating shareholder value. The company remains dedicated to producing difficult-to-manufacture pharmaceutical products for regulated markets, establishing itself as a leader in the “in Africa for Africa” strategic framework. Strides’ strategy of providing highly specialized and technologically sophisticated products has cemented its standing as a market leader in the regions it serves. Additionally, Strides’ focus on servicing donor-funded markets has provided the company with an edge in delivering essential drugs to underserved populations, bolstering its reputation as a socially responsible entity within the pharmaceutical industry.

The upcoming Q2FY25 earnings report, which will include updates on OneSource’s business activities, is expected to offer further insight into the financial and operational trajectories of Strides and OneSource. Investors are closely monitoring these reports to evaluate the efficacy of recent consolidation efforts and the performance of OneSource as an independent entity. The earnings report is also anticipated to provide updates on the integration process and outline future growth initiatives, which may include further expansions, strategic partnerships, and additional capital raising efforts to support the company’s ambitious objectives. With multiple growth levers in place and a solid operational foundation, OneSource is well-positioned to leverage future opportunities, ultimately delivering significant value to its stakeholders.