“Aurobindo is known to be value-conscious about its acquisitions and would only go for one that it finds suitable,” said a Mumbai-based analyst. He said Aurobindo’s strength lies in manufacturing and that is why it has been a leading generics player in the US market and is present in B2B sales (of bulk drugs) in India. The US contributed roughly 45 per cent of its turnover in FY18. According to the company’s quarterly results, its API business in the domestic market posted strong growth of 19.7 per cent to Rs 7.48 billion and contributed 17.6 per cent of the revenues during the first quarter of the current financial year.
“It does not have a strong marketing team or even the expertise to handle medical representatives or dealing with clinicians. In order to have a head-start in the domestic space, it thus needs to make an acquisition,”said the analyst, who did not wish to be quoted. It does not wish to enter the generic drugs space in India as it is low value business.
“We believe they (Aurobindo Pharma) could enter the Indian branded market if they get any sizeable asset at an attractive valuation,” said Amey Chalke, pharma analyst, HDFC Securities. Aurobindo has always been prudent in relation to M&As in the past and has acquired assets, which are available at steep discount, he said.
The $900-million deal, that catapulted Aurobindo to the spot of second-largest generic player in the US, included Sandoz's branded dermatology products, authorised generics, and in-licensing products, besides three manufacturing facilities among others. In the US, Aurobindo has presence in brands through Natrol that has dietary supplements. AuroHealth division in the US comprises branded OTC products but analysts pointed out these were white-label products that were sold through modern retail like Walmart etc.
"Most of Aurobindo's US business, too, is also B2B. The company is now slowly focussing on developing a branded business in the countries its operates in. For example, in some of the European countries it is slowly building a branded business," a source said.
Its European business is also largely driven by acquisitions. After the Actavis deal in 2014, this July it inked a pact to acquire Apotex's commercial operations across five European countries, including Poland and Spain, for ^74 million. The acquisition includes a portfolio of over 200 prescription drugs and 88 OTC products and an additional pipeline of over 20 products, which are expected to be launched over the next two years.
It has done well with the recent acquisitions too - it turned Actavis's loss making Western European operations within two years.
ON THE LOOK OUT
The company is looking for a potential acquisition in the range of Rs 30-40 billion
It had been looking for potential targets in the Indian market, but did not find a suitable match
The pharma company has always been prudent in relation to M&As in the past and has acquired assets, which are available at steep discount
It is known to be value-conscious about its acquisitions