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COMMENT
Aurobindo Pharma (ARBN.BO) Rs204.95
Negative News – Ratings Under Review Equity Research
USFDA import alert on Cephalosporin facility poses earnings risk
News
Aurobindo Pharma (APL) has announced that the USFDA has imposed an
import alert for the detention of products from its Cephalosporin facility
(Unit VI) located in Chitkul Village, Andhra Pradesh, India. The unit was
audited by USFDA in Dec. 2010. APL sent the compliance report to USFDA,
which was under review. Subsequent to the audit findings, the USFDA
imposed an import alert. APL is trying to understand if it relates only to
sterile products and/or oral products manufactured at Unit VI. Until the
issue is resolved, it will impact any further shipment from Unit VI to the US
market.
Analysis
Aurobindo's Unit-6 plant is one of Asia's biggest, export-oriented pharma
units which is currently manufacturing cephalosporin antibiotics (both
parenteral and oral formulations). This plant generated around 70mn$ of
sales in 2010, of which $35mn from the US. As per the company, it is not
yet certain if the FDA import alert affects only the sterile products (US$4-
5mn of sales in US), or if it includes oral products too (30mn$ of sales in
US). It believes that the impact on revenues could be a maximum of $35mn
in sales being blocked under the import alert (4% of FY11E Revenues). The
company also stated that it is not selling any Cephalosporin APIs in the US,
which constitutes 19% of our FY11E revenues. It also clarified that their
deal with Pfizer does not include any Cephalosporine formulation sales for
the US market.
Implications
We place our rating, target price and earnings for Aurobindo under review
pending further clarity from management on (1) the extent and magnitude
of the import alert impact to Aurobindo’s overall business; (2) possible
resolution timelines; (3) reasons for the import alert and possibility of
similar actions on other plants. (4) potential ramifications on
manufacturing partnerships.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
Asia Pacific Conviction Buy List
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
COMMENT
Aurobindo Pharma (ARBN.BO) Rs204.95
Negative News – Ratings Under Review Equity Research
USFDA import alert on Cephalosporin facility poses earnings risk
News
Aurobindo Pharma (APL) has announced that the USFDA has imposed an
import alert for the detention of products from its Cephalosporin facility
(Unit VI) located in Chitkul Village, Andhra Pradesh, India. The unit was
audited by USFDA in Dec. 2010. APL sent the compliance report to USFDA,
which was under review. Subsequent to the audit findings, the USFDA
imposed an import alert. APL is trying to understand if it relates only to
sterile products and/or oral products manufactured at Unit VI. Until the
issue is resolved, it will impact any further shipment from Unit VI to the US
market.
Analysis
Aurobindo's Unit-6 plant is one of Asia's biggest, export-oriented pharma
units which is currently manufacturing cephalosporin antibiotics (both
parenteral and oral formulations). This plant generated around 70mn$ of
sales in 2010, of which $35mn from the US. As per the company, it is not
yet certain if the FDA import alert affects only the sterile products (US$4-
5mn of sales in US), or if it includes oral products too (30mn$ of sales in
US). It believes that the impact on revenues could be a maximum of $35mn
in sales being blocked under the import alert (4% of FY11E Revenues). The
company also stated that it is not selling any Cephalosporin APIs in the US,
which constitutes 19% of our FY11E revenues. It also clarified that their
deal with Pfizer does not include any Cephalosporine formulation sales for
the US market.
Implications
We place our rating, target price and earnings for Aurobindo under review
pending further clarity from management on (1) the extent and magnitude
of the import alert impact to Aurobindo’s overall business; (2) possible
resolution timelines; (3) reasons for the import alert and possibility of
similar actions on other plants. (4) potential ramifications on
manufacturing partnerships.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
Asia Pacific Conviction Buy List
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