Shilpa Medicare Limited , a prominent Indian pharmaceutical company, has announced a significant international expansion through its wholly-owned subsidiary, Koanna International FZ LLC. The company has entered into a definitive agreement with Pharma Pharmaceutical Industries & Biological Products (PPI), a leading Saudi enterprise, to establish a new joint venture in Saudi Arabia.

Joint Venture Structure and Objectives

The newly formed joint venture will see PPI holding a 70% majority stake, while Koanna International FZ LLC will retain a 30% ownership. This strategic partnership aims to establish a state-of-the-art pharmaceutical manufacturing facility in Saudi Arabia, marking a significant step in Shilpa Medicare's global expansion strategy.

Two-Phase Implementation Plan

The joint venture will be executed in two key phases:

1. Phase One: Shilpa Group will supply finished products in bulk for repackaging at the new joint venture company's facility. This approach ensures a swift market entry for key products. Concurrently, PPI will be responsible for establishing a fully-equipped manufacturing facility with technical input from Shilpa Group.

2. Phase Two: Shilpa Group will conduct a comprehensive technology transfer of its manufacturing processes to the joint venture. This will enable the local production of finished pharmaceutical products in Saudi Arabia.

Roles and Responsibilities

Under the terms of the agreement:

• Shilpa Group will provide technical support for the transfer of the project site to the joint venture company.
• PPI will be responsible for equipping the facility with all necessary infrastructure and packaging equipment to meet international standards.
• Shilpa Group will prepare the complete regulatory registration dossier in compliance with the Saudi Food and Drug Authority (SFDA) and lead the process of obtaining the necessary Market Authorization.

Strategic Implications

This joint venture represents a significant milestone for both companies:

• For Shilpa Medicare, it strengthens its global footprint and consolidates its presence in the MENA (Middle East and North Africa) region.
• For PPI, it brings world-class manufacturing technology and expertise to Saudi Arabia, accelerating its ability to meet the growing healthcare needs of the Kingdom with locally manufactured, high-quality medicines.

Alignment with Saudi Vision 2030

The partnership aligns with Saudi Arabia's Vision 2030 goals of economic diversification and localizing strategic industries. It represents a significant step in enhancing the Kingdom's healthcare infrastructure and pharmaceutical manufacturing capabilities.

Management Commentary

Mr. Vishnukant Bhutada, Managing Director of Shilpa Medicare Ltd, commented on the joint venture: "We are excited to partner with PPI. This joint venture combines PPI's unmatched local strength with Shilpa's innovative technology to improve healthcare in the Kingdom. PPI is the ideal partner to make our products more accessible. This JV underscores our commitment to Saudi Arabia and will consolidate our presence across the MENA region."

Mr. Wael B Aldahhasi, Chairman of PPI, added: "Partnering with Shilpa Group allows us to bring world-class manufacturing technology and expertise to the Kingdom. This initiative will accelerate our ability to meet the growing healthcare needs of Saudi Arabia with locally manufactured, high-quality medicines."

This strategic move by Shilpa Medicare Limited through its subsidiary Koanna International FZ LLC marks a significant step in the company's international expansion and its commitment to enhancing healthcare accessibility in the Middle East and North Africa region.

Shilpa Medicare Limited, a prominent player in the pharmaceutical industry, has reported a strong start to the fiscal year, with significant growth in revenue and profitability for the first quarter.

Financial Highlights

The company reported a revenue of INR 328.00 crores for Q1, marking a 9% year-over-year growth. This growth was primarily driven by the API and Biologics verticals. Shilpa Medicare achieved its highest ever quarterly EBITDA of INR 98.00 crores, an 18% increase from INR 83.00 crores in the same quarter last year. The EBITDA margin stood at an impressive 30%.

Gross margins saw a substantial improvement, reaching 76% - a 700 basis point increase compared to the previous year. This enhancement was attributed to a better product mix and strategic measures implemented by the company.

Segment Performance

API Segment

The API business, including captive consumption, generated revenue of INR 227.00 crores, with external sales of INR 187.00 crores, growing at 8% year-on-year.

Formulations

The Formulation segment contributed INR 98.00 crores to the total revenue, driven mainly by performance in ROW (Rest of World) and European markets.

Biologics

This segment showed significant growth, with revenues reaching INR 73.00 crores during the quarter.

Key Developments

1. NorUDCA Approval: Shilpa Medicare received approval for Nor-Ursodeoxycholic acid (NorUDCA), its first New Chemical Entity (NCE). The company plans to launch this product in India, targeting the large Non-Alcoholic Fatty Liver Disease (NAFLD) patient population.

2. Biologics Progress: The company's biosimilar Nivolumab is expected to enter human studies. Additionally, Shilpa Medicare has entered into agreements for two Novel Biological Entity (NBE) programs.

3. Formulation Pipeline: The company has three NDA products approved in the U.S. market and is expecting reasonable contributions from these in the current financial year.

4. CDMO Projects: Shilpa Medicare is currently working on over 25 active CDMO projects across various clinical phases, with two projects expected to be commercialized next year.

5. Debt Management: The company has replaced its high-cost Non-Convertible Debentures (NCDs) of INR 75.00 crores with lower-cost debt, which is expected to reduce interest burden in the coming quarters.

Future Outlook

Keshav Bhutada, Executive Director and CEO of Shilpa Pharma Lifesciences Limited, expressed optimism about the company's future, stating, "With our relentless focus on monetization of assets, we are confident to continue the momentum in upcoming quarters."

The company is expanding its presence in complex generics, NCEs, and NBEs, which is expected to drive sustainable long-term growth. Shilpa Medicare is also making strides in the peptides segment, with products like liraglutide, semaglutide, and tirzepatide in various stages of development.

In a move to improve stock liquidity and reward long-term investors, the Board has proposed a bonus issue of 1:1.

With a strong pipeline of products across various segments and ongoing expansion in global markets, Shilpa Medicare appears well-positioned for continued growth in the coming years.