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Aurobindo Pharma – Stock For the Month of November 2018

Price: Rs. 816

About the Company

Aurobindo Pharma Limited is a leading global pharmaceutical company, producing generic formulations and Active Pharmaceutical Ingredients (APIs). Nearly 90% of the Company’s revenue is driven by its international operations. Aurobindo operates through a network of 20 manufacturing facilities in India, three manufacturing facilities in the U.S., one in Brazil and one in Portugal.

Aurobindo markets its products and solutions across 150+ countries; with growing penetration in the U.S. and Europe.

Product Portfolio – Aurobindo is a market leader in semi-synthetic penicillin and has established a strong foothold in therapeutic areas, including antibiotics, antiretrovirals (ARVs), cardiovascular (CVS), central nervous systems (CNS), gastroenterologicals, anti-diabetics and antiallergics.

As on 31 March 2018, the Company filed 478 ANDAs on a cumulative basis. Of the total count, 327 have final approvals and 34 have tentative approvals and the balance 117 ANDAs are under review.

Capacity Expansion – To manufacture a growing product pipeline, the Company has taken significant steps towards capcity expansion and improvement to bolster volumes:

  • Unit XVI: The Company has successfully commissioned Betalactum injectables manufacturing facility at Jadcherla, Telengana in FY 2018, which will improve the injectable volumes for the U.S., EU and Growth Markets.
  • Unit X: The Company is building a USFDA compliant oral manufacturing facility at Naidupet, Andhra Pradesh; and the facility will be commissioned during FY2019. It has been inspected by USFDA and EMA.
  • Injectable facility in US: The Company is in the process of setting up a non-Betalactum injectable manufacturing facility in the U.S.

U.S. Formulation Business – Well diversified product portfolio and new product launches has helped the Company to gain steady growth in U.S. market. In FY 2018, the Company launched 38 products, including six injectables in the U.S. market and filed 47 ANDAs with the USFDA, including for 16 injectables and received final approvals for 49 ANDAs, including seven injectables.

Aurobindo is continuously trying to build a strong product pipeline for the U.S. market with differentiated products which will help improve product mix and margins going forward.

AUROBINDO 5 YEAR AVERAGE P/E = 14.06
2014 2015 2016 2017 2018
Price 255.43 610.1 745 675.15 557.25
EPS 40 54 33.92 39.33 41.36
P/E 6.39 11.30 21.96 17.17 13.47
Current P/E
Price 816
EPS (TTM) 40.29
P/E 20.25

Major Issues Faced by Indian Pharmaceutical Market

U.S. Regulatory Concern

The U.S. continues to be an important market for Indian Pharmaceutical companies, with a sizeable amount of revenue coming from the region.

Indian Pharmaceutical Companies U.S Exposure – Sun Pharma (34%), Cipla (17%), Lupin (37%), Aurobindo (45%), Cadila Healthcare (50%) and Dr Reddy (52%).

In the last few years, the US Food and Drug Administration (USFDA) has raised red flag during its inspections on select Indian manufacturing facilities. This has impacted exports to the U.S. (where Indian pharma companies have much exposure) and product approvals. Other factors like increasing competition, new ANDA (abbreviated new drug approvals), consolidation of channel partners, price erosion are other major reasons behind the downfall of the Indian pharmaceutical companies.

Read More – Top 5 Undervalued Indian Pharma Stocks