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Pharmaceuticals
Aurobindo Pharma
�� Aurobindo has a derisked business model with multiple plants, large product basket and
low customer concentration risks (Pfizer contribution below ~10% of overall revenues).
Furthermore, Aurobindo relies on off-patent US generic products rather than first-to-file
products and hence faces minimal litigation risks.
�� The company is focusing on low-margin, high-volume US generic business and hopes to
increase its market share through cost competitiveness with vertically integrated plants.
�� Operating margin is c. 19%, or ~22% including dossier income. The API and formulation
businesses generate operating margins of ~16% and ~20% respectively. The Pfizer
supply deal commands ~20% operating margin.
�� With only a few phases of its newly established facilities in SEZ Hyderabad and New
Jersey having received regulatory approvals, Aurobindo’s capacity utilization is at a
significantly low level of ~45%. Following approval, we think it should be able to boost
utilization and hence financials. The company guides USD2bn revenue in FY13e, up from
the present USD1bn.
�� Aurobindo recently received an import alert from the US FDA on account of deviation
from cGMP guidelines for unit VI (Cephs). An import ban would affect only ~4% of
revenue. Aurobindo hopes to receive a formal communication from the US FDA by next
week.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Pharmaceuticals
Aurobindo Pharma
�� Aurobindo has a derisked business model with multiple plants, large product basket and
low customer concentration risks (Pfizer contribution below ~10% of overall revenues).
Furthermore, Aurobindo relies on off-patent US generic products rather than first-to-file
products and hence faces minimal litigation risks.
�� The company is focusing on low-margin, high-volume US generic business and hopes to
increase its market share through cost competitiveness with vertically integrated plants.
�� Operating margin is c. 19%, or ~22% including dossier income. The API and formulation
businesses generate operating margins of ~16% and ~20% respectively. The Pfizer
supply deal commands ~20% operating margin.
�� With only a few phases of its newly established facilities in SEZ Hyderabad and New
Jersey having received regulatory approvals, Aurobindo’s capacity utilization is at a
significantly low level of ~45%. Following approval, we think it should be able to boost
utilization and hence financials. The company guides USD2bn revenue in FY13e, up from
the present USD1bn.
�� Aurobindo recently received an import alert from the US FDA on account of deviation
from cGMP guidelines for unit VI (Cephs). An import ban would affect only ~4% of
revenue. Aurobindo hopes to receive a formal communication from the US FDA by next
week.
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