STRIDES PHARMA: Will the tide turn favourable for the company?

Dear readers,

Markets have turned jittery near the all time high with rate hike announcement by Federal reserve. Bond yields have again shoot up and equities have taken a backseat. Amidst chaos, there are many stocks which are doing relatively well and looking very attractive from long term. One of such counters is a pharmaceutical player, STRIDES PHARMA. Let’s understand recent fundamental & technical developments.

Company Background
Strides pharma is a generic drug manufacturer with major focus on development and manufacturing of IP-led niche finished dosage formulations. It is also among the world’s largest manufacturers of soft gelatine capsules. Let’s just understand couple of recent approvals from the USFDA & company developments, which are expected to provide the stable and incremental revenue to the company.

Important USFDA Approval for HIV Drug:
During previous week, Strides Pharma’s Singapore-based step down subsidiary, Strides Pharma Global Pte Ltd, received tentative approval from the USFDA for dolutegravir 50 mg tablet. Dolutegravir is an antiretrovirals & is used to prevent multiplication of viruses in human cells. This drug serves as the first line of antiretroviral therapy (ART) mainly for HIV infection & limits the chances of new infections. Because of its antiviral nature, this drug has received a lot of importance in the recent times, post COVID 19 pandemic. The Dolutegravir Market is Forecasted to Reach a Multimillion-Dollar Valuation by 2030.

Important USFDA Approval for drug for Kidney problems
During September 2023 itself, Strides pharma arm, Strides Pharma Global Pte Ltd Singapore has received approval for its generic Sevelamer Carbonate for oral suspension indicated for patients with chronic kidney diseases on dialysis to prevent dangerous increase in phosphate. There are very limited players in the segment offering both tablets & oral suspensions. Market size of Sevelamer Carbonate market has a combined opportunity of USD 212 million.

Important USFDA Approval for drug for Organ Transplant patients
During August 2023, Strides pharma arm, Strides Pharma Global Pte Ltd Singapore has received approval for generic Mycophenolate Mofetil for oral suspension indicated in organ transplant patients to avoid rejection. This approval strengthens company’s Mycophenolate portfolio, which already includes numerous products. This drug has a market size of USD 41 million.

Corporate Restructuring of Subsidiaries
Along with these recent approvals, company also underwent some restructuring and corporate adjustments, which will strengthen its core product portfolios & streamline revenues going forward.

On the shareholding front, DIIs have increased stake in the company from approx. 15% during Sept 2022 to 19.5% during June 2023. Government has also bought a small stake of 0.40% in the last 1 year.

Alongside improving fundamentals, let’s look at technical formations on the charts to understand trends. This is weekly chart of Strides pharma of last 2 decades.

Referring to weekly chart, couple of interesting observations are noticed. Since year 2000, a typical 338 weeks’ cycle is observed on the chart. The first positive really emerged from 2009 to 2016. Post 2016, the price entered downtrend and made extreme bottom near mid of 2015. This entire correction halted at 78.6% retracement of Fibonacci. That zone (highlighted with yellow colour) is also a strong support zone for the stock since 2017. From the extreme lows, price has bounced decently and now seems to have entered a new leg of uptrend. Price is sequentially making higher tops and higher bottoms, confirming uptrend. Amidst uptrend, RSI has crossed 70 zone and sustaining above that level, which confirms decent strength on the price action and potential to pick up momentum going forward. Historically RSI above 70 has given good push to prices even in mid term. With supportive volume during uptrend, I think one can certainly rely on emerged uptrend in the stock.

Considering fundamental developments as well as technical factors, I believe that it is a good investment for mid to long term with potential of 30% upside in long term.

Kindly note that this update is only for educational purpose. It is safe to assume that my personal position, my fund’s position, my client’s position and my relative’s position may be open in the counter. Prefer to take the advice of your financial advisor before initiating any position.