Aurobindo: US sales propelling growth

Even as many Indian pharma companies are facing concerns over slowing growth in the world’s largest healthcare market - the US - Aurobindo continues gaining traction. Thus, most analysts remain upbeat on the firm’s growth prospects. On Wednesday, Aurobindo got fresh approval to launch generics drug of multi-billion cholesterol-lowering drug Rosuvastatin. The drug has an estimated market size of $6.7 billion, based on data for the 12 months ending May 2016 according to IMS Health. Since Aurobindo was one of the first Abbreviated New Drug Application (ANDA) applicants with a paragraph IV certification, it will get 180 days of exclusivity for the launch of generics. Others like Sun Pharma, Glenmark are also likely to get approvals and share the exclusivity period. Sarabjit Kour Nangra at Angel Broking estimates Aurobindo to get sales of $150-200 million from the product in the first six months of launch, which will substantially boost its FY17 earnings and US sales. Not surprisingly, the stock gained 5.1 per cent to close at Rs 797.05 on Wednesday.

Most analysts were upbeat on Aurobindo’s US prospects as the company has received final clearance reports from US FDA for most of its inspected facilities. Therefore, and with a good product pipeline, approval flows remain robust.

Last month, Deutsche Bank’s analysts had said that they expected faster approvals and market share gains in the US, combined with the successful turnaround of the European acquisition, to drive Aurobindo’s earnings by a compounded annual growth of 18 per cent over FY16-18.

To drive its European business, Aurobindo had made an acquisition. It turned around the acquired company in FY16 through site transfers of products to India. Thirty-two products so far are expected to have received site transfers. This will add to the overall earnings of Aurobindo.  While Deutsche Bank’s price target for Aurobindo’s stock is Rs 880, another foreign brokerage that came out with a report on Wednesday with a target price of Rs 900 expects the company’s earnings to clock 18 per cent annual growth till FY19. The company’s US pipeline has about 400 ANDAs with 147 pending approvals. The continuous focus on complex generics in oncology, ophthalmology, peptides and hormones should also support profitability. Analysts at Motilal Oswal Securities recently said that they expected the US business to double and reach $2 billion in revenues by FY20.

Aurobindo’s niche injectable segment is likely to grow multi-fold, while its nutraceuticals and over-the-counter businesses are strengthened by acquisition of Natrol’s US business. The oral solids business is already growing well.

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