| Aurobindo Pharma Key takeaways from conference call | ||
Aurobindo Pharma (ARBP IN, Not Covered, Rs638.55) reported 4QFY14 results ahead of consensus estimates, driven by limited supply of gCymbalta sales during the exclusivity period in the US. Revenue in the quarter was Rs23.3bn (+48% YoY; +9% QoQ) vs Bloomberg consensus estimates at Rs21.7bn. EBITDA of Rs7.4bn was 20% higher than consensus. While the company did not give specific guidance, it indicated that ARBP would maintain growth momentum seen in the past 2-3 years, with continued growth in the base business in the US, strong trends in injectable, AuroLife, and additions to the European business (EUR330-340mn). On margins, the company highlighted that it would maintain or better EBITDA margins from base quarter (pre-Cymbalta quarter of 2QFY14) levels of 23%, excluding Cymbalta and any impact from the European acquisition.
· Outlook on Actavis’ European assets acquired. Management indicated that operations were in line with expectations and maintained guidance of turning around the loss-making operations to achieve breakeven by the second year-end (PAT neutral or positive). The key driver for this would be: 1) switching ARBP products with Actavis and vice versa depending on profitability; 2) operational optimization without impacting revenue and 3) over the next 18-24 months bringing some products in-house to take advantage of ARBP’s low cost API. Overall for its European business, revenue growth (ARBP + acquired assets) is expected at 10% in FY15, as per management. On potential restructuring, ARBP indicated that it would take at least two quarters to get a complete picture on this.
· US business growth in FY15: Base business (esp oral business) has witnessed upside from market-share gains as players exit and an inflationary environment in some products. The business has also seen some margin compression from customer consolidation. Overall, management is seeing price erosion of 5-6% YoY on the business but ARBP’s base business grew by 24%, which was augmented by Cephalosporin re-launches and new products.
o ANDA pipeline: The company filed 67 ANDA in FY14 (28 ANDA in 4Q taking benefit of one-batch and lesser period of stability of 3-months) with total ANDA of 336 and pending approval of 145 products. Most of the filings in 4Q are in injectables, with ~45 injectable ANDA pending approval. On peptides, first filing is 6-7 months away, as per the company.
o AuroLife revenue was $74Mn in FY14 and also turned profitable with an enhanced order book and the introduction of new molecule in the controlled substances business. Growth was driven by expansion in the base business, opportunistic products contribution and also Federal VA awards for five years with several new products (contributing $15-20Mn revenue in FY14). On controlled substances, ARBP received more approvals with contribution from Oxycodone and also had some revenue from Dextroamphetamine. On the Dextromphetamine combo, there were some delays in quotas so revenue recognition started from 1QFY15. ARBP indicated that revenue in FY15 would be better than last year, with a full year’s contribution from Oxycodone, new launches and any approvals they might receive.
o Injectable revenue was $37Mn in FY14 and management expects this to ramp up to $60Mn in FY15 with the revenue contribution from Unit IV increasing from 9% of sales to 27% as revenue from products approved last year ramp up. Management indicated that new product approvals from Unit IV in FY15 would be in the 4Q (Dec-14 or later) given these were filed in end 2012. ARBP expects approvals to ramp up significantly in 2015-16 based on filings. On future filings, it is looking at hormonal, oncology filings, product portfolio for hospitals, renal, oncology clinics. The Oncology block is likely to be commissioned in Mar-15 and management expects filings to start towards end CY15.
o Cephalosporin products reintroduced generated revenue of $28Mn in FY14 and management expects similar or slightly higher revenue next year depending on seasonality (light in FY14 but hoping for a better season this year).
o Other highlights: On channel consolidation, management expects benefits from large requirement from big customers with ARBP’s position as high volume supplier with opportunity as customers become globally oriented. On shortages in injectables, ARBP noted that Hospira is working at coming back into the market with its remediation measures. However, the Bedford acquisition by Hikma will take a year to get products back into the market that are in shortage. Currently, ARBP has few products in the shortage list.
· Debt reduction to continue. Net debt as of Mar-14 was $537Mn, which is mostly non-INR. Management indicated debt repayment of $67Mn in FY14 and highlighted repayment of another $100-125Mn in FY15 (working capital and long-term debt). Debt reduction will be seen from 1Q itself with the decline in debtors, with the realization of sales and Rs4bn in loans and advances (related to GPB49Mn cash from Actavis acquisition pending completion as of Mar-14) will also flow into Cash in 1Q.
· Other details: 1) Capex expected at Rs4-5bn vs Rs3.5bn in FY14 (excluding acquisitions); 2) all facilities have been inspected in the last two years but there 2-3 facilities likely to be inspected in the near term; 3) Fondaparinux filed earlier this year so approval likely only in CY16.
Table 1: ARBP – Quarterly Financials
Quarterly Financials
|
Mar-13
|
Jun-13
|
Sep-13
|
Dec-13
|
Mar-13
|
Total Revenues
|
15,703.7
|
17,155.6
|
19,138.6
|
21,405.6
|
23,298.1
|
% YoY
|
31.9
|
41.3
|
27.6
|
36.3
|
48.4
|
Changes in Inventories
|
(61.5)
|
526.2
|
391.7
|
(967.7)
|
(970.2)
|
Cost of Materials Consumed
|
7,558.0
|
7,869.3
|
8,516.6
|
9,029.4
|
9,815.3
|
% of Revenue
|
48.1
|
45.9
|
44.5
|
42.2
|
42.1
|
Purchases of Stock-in-Trade
|
550.2
|
517.3
|
283.8
|
915.5
|
133.1
|
% of Revenue
|
3.5
|
3.0
|
1.5
|
4.3
|
0.6
|
Gross Profit
|
7,657.0
|
8,242.8
|
9,946.5
|
12,428.4
|
14,319.9
|
Gross Margin (%)
|
48.8
|
48.0
|
52.0
|
58.1
|
61.5
|
Employee Expenses
|
1,751.8
|
1,889.1
|
1,959.6
|
2,134.3
|
2,336.2
|
% of Revenue
|
11.2
|
11.0
|
10.2
|
10.0
|
10.0
|
Other Expenses
|
3,504.4
|
3,276.6
|
3,603.4
|
3,856.1
|
4,554.2
|
% of Revenue
|
22.3
|
19.1
|
18.8
|
18.0
|
19.5
|
EBITDA
|
2,400.8
|
3,077.1
|
4,383.5
|
6,438.0
|
7,429.5
|
EBITDA Margin (%)
|
15.3
|
17.9
|
22.9
|
30.1
|
31.9
|
Depreciation & Amortization
|
692.8
|
719.2
|
766.2
|
759.7
|
880.2
|
EBIT
|
1,708.0
|
2,357.9
|
3,617.3
|
5,678.3
|
6,549.3
|
Interest expense
|
316.0
|
253.9
|
245.8
|
237.4
|
342.3
|
Other Income
|
140.9
|
39.2
|
51.1
|
35.6
|
106.5
|
Foreign Exchange (Gain)/ Loss
|
13.0
|
1,724.1
|
682.9
|
(20.8)
|
(355.6)
|
PBT
|
1,519.9
|
419.1
|
2,739.7
|
5,497.3
|
6,669.1
|
Tax Expense
|
445.2
|
244.5
|
401.1
|
1,336.1
|
1,652.8
|
Tax Rate (%)
|
29.3
|
58.3
|
14.6
|
24.3
|
24.8
|
Recurring PAT
|
1,074.7
|
174.6
|
2,338.6
|
4,161.2
|
5,016.3
|
PAT margin (%)
|
6.8
|
1.0
|
12.2
|
19.4
|
21.5
|
Exceptional Item
|
0.0
|
0.0
|
0.0
|
0.0
|
0.0
|
Minority Interest
|
(11.4)
|
(11.4)
|
(10.9)
|
(13.7)
|
(1.8)
|
Reported PAT
|
1,086.1
|
186.0
|
2,349.5
|
4,174.9
|
5,018.1
|
Adjusted PAT
|
1,087.7
|
1,898.7
|
3,021.5
|
4,140.4
|
4,660.7
|
Adj. PAT margin (%)
|
6.9
|
11.1
|
15.8
|
19.3
|
20.0
|
Source: Company reports.
Table 2: ARBP – quarterly segmental details
Quarterly Financials
|
Mar-13
|
Jun-13
|
Sep-13
|
Dec-13
|
Mar-13
|
Formulations
|
9,180.0
|
11,005.0
|
12,283.0
|
14,361.0
|
16,135.0
|
% YoY
|
41.5
|
68.1
|
36.1
|
57.5
|
75.8
|
US Formulations
|
4,860.0
|
6,248.0
|
7,308.0
|
9,312.0
|
11,160.0
|
% YoY
|
61.5
|
90.3
|
72.0
|
81.4
|
129.6
|
US Formulations ($Mn)
|
89.7
|
111.9
|
117.8
|
150.2
|
180.8
|
Injectables ($ Mn)
|
7.0
|
8.0
|
10.0
|
12.0
| |
EU+RoW Formulations
|
2,492.0
|
2,839.0
|
2,644.0
|
2,845.0
|
3,026.0
|
% YoY
|
45.1
|
52.6
|
17.1
|
27.4
|
21.4
|
Europe
|
1,739.0
|
1,706.0
|
1,510.0
|
1,768.0
| |
RoW
|
1,100.0
|
939.0
|
1,337.0
|
1,258.0
| |
ARV Formulations
|
1,828.0
|
1,918.0
|
2,331.0
|
2,204.0
|
1,949.0
|
% YoY
|
3.9
|
36.8
|
(7.6)
|
25.9
|
6.6
|
API
|
6,668.0
|
6,469.0
|
7,180.0
|
7,445.0
|
7,548.0
|
% YoY
|
16.9
|
10.2
|
15.4
|
12.8
|
13.2
|
SSPs
|
1,885.0
|
2,222.0
|
2,429.0
|
2,583.0
|
2,544.0
|
% YoY
|
14.4
|
24.1
|
31.6
|
21.3
|
35.0
|
Cephs
|
2,436.0
|
2,163.0
|
2,067.0
|
2,175.0
|
2,350.0
|
% YoY
|
26.0
|
(3.0)
|
(8.3)
|
(11.3)
|
(3.5)
|
Non-Pen Non -Cephs
|
2,347.0
|
2,084.0
|
2,684.0
|
2,687.0
|
2,654.0
|
% YoY
|
10.7
|
12.6
|
26.6
|
33.0
|
13.1
|
Dossier licensing income
|
189.0
|
30.0
|
63.0
|
17.0
|
55.0
|
% YoY
|
551.7
|
(55.9)
|
(46.2)
|
(95.6)
|
(70.9)
|
Source: Company reports.
No comments:
Post a Comment