Strides Arcolab Gets Two USFDA Approvals, Growth Prospects Bright

Strides Arcolab, a pharmaceutical major, has announced that it has received USFDA approval for two of its injectable drugs. This approval is for Fluorouracil Injection USP in two formulations i.e. Fluorouracil Injection 50 mg / ml (single-dose vials) and 2.5 gm / 50 ml and 5 gm / 100 ml (pharmacy bulk packages).

As per IMS’ health reports and the company’s filing with the BSE, Fluorouracil appears in the products list that is currently facing a shortage in the U.S. The market potential for this product is USD 14 million i.e. about Rs 77 crore.

Fluorouracil is a chemotherapy drug used in the treatment of several types of cancer of the colon, rectum, head and neck. Many of the injectables are currently not available or are in short supply in the U.S., this being a market from where Strides derives most of its income. Besides, this category of products (specialty class) attracts higher margins.

Recently the company had expressed its plans to foray into the Canadian market too. With its strong experience in injectables it is set to go to the next level of growth in the U.S. as well as in Canada. The company will announce its Q1 results by July 27, 2012. The market expects better earnings during the quarter, reflected in its price which has gone up by 6 per cent during this month.

Going ahead we expect the product approvals to continue. As the company expects to launch many of the approved products from its pipeline this year, its topline growth will remain in the range of 30 per cent, as per the management’s estimate. Moreover, the net profit margins are also expected to be good due to a lower level of debt. We are bullish on this company and our advice to investors is to buy the scrip.