Aurobindo Pharma - Company Update - Centrum

Aurobindo Pharma

Buy

Target Price: Rs245

CMP: Rs140

Upside: 75%

US performance to excel

We recently interacted with company officials of Aurobindo Pharma (APL) to get the latest update on the company. The key highlights are:

m  Unit VI cleared by US FDA: APL has received Establishment Inspection Report (EIR) for its Unit VI manufacturing cephalosporin oral and sterile products. The unit was under Import Alert from February’11 and was re-inspected by US FDA in September’12. The current potential from this unit is $25-30mn (Rs1.35-1.60bn) annually. The company will commence exports from this unit from April’13.
m  Other two units cleared: APL’s other two manufacturing units, Unit IV manufacturing general liquid injectables and Unit XII manufacturing SSP-oral and sterile have also been cleared by US FDA after re-inspection in Q3FY13. The company’s US subsidiary Auromatics is likely to market the products from these two units. The company expects revenues of ~$30mn (Rs1.60bn) annually from these two units.
m  Strong performance in the US:  APL’s formulation exports to US grew by 58%YoY from Rs3.25bn to Rs5.13bn. The company received approval for 7 ANDAs during Q3FY13 for Rizatriptan Benzoate tablets, Felodipine ER tablets, Oxacillin injection, Levofloxacin injection, Pioglitazone tablets, Pioglitazone+Metformin tablets, Valsartan+Hydrochlorithiazide tablets. The combined market size for these 7 products at the innovator level is $4.86bn (Rs262bn). All these products are likely to contribute to the full year from FY14 onwards.
m  Strong product pipeline in the US: APL has filed 262 ANDAs with US FDA of which 171 were approved by the end of Dec’12. The company has filed 1337 dossiers in Europe.
m  Penicillin, cephalosporin business growing well: APL’s SSP and cephalosporin API businesses have grown by 36% and 30% respectively due to favourable demand and lower competition. The company intends to maintain good growth in these segments in the domestic and emerging markets.
m  New geographies added: APL has entered into new geographies of Canada, Japan and Australia. It has received 37 ANDA approvals in Australia and 26 in Canada. The company expects revenues from Canada and Japan from FY14. The revenues from Australia are expected from FY15 onwards.
m  Dossier income: APL received Rs386mn ($7mn) from the sale of dossiers in Q3FY13. Dossier income keeps on varying based on the filings of the generic company. The company expects revenues of $2-3mn (Rs108-162mn) per quarter. This is a high margin business as the costs are already accounted for in the previous quarters.
m  API reports 21% growth: The company’s API business (40% of revenues) grew by 22% during Q3FY13. Major growth drivers were SSP and cephalosporin which grew by 36% and 30% respectively.
m  Debt repayment: The company has debt of Rs33.0bn (including working capital) currently. It is likely to repay $50mn (Rs2.7bn) from internal accruals in FY14. The repayment of ECB of ~$40mn (Rs2.16bn) annualy will fall during FY15-FY19 and most likely will be met from internal accruals.

-- 

�� -->