Aurobindo Pharma Fundamental Analysis and Future Outlook
Aurobindo Pharma commenced its operations in 1988 with a single manufacturing facility for Semi-Synthetic Penicillin (SSP) in Pondicherry. Today the company is one of the largest generic pharmaceutical player in the industry with 29+ manufacturing facilities, 155+ markets and 26+ billion dosage forms. Aurobindo Pharma has a presence in key therapeutic segments such as neurosciences (CNS), cardiovascular (CVS), anti-retroviral, anti-diabetics, gastroenterology and Anti-biotics.
I have evaluated the company on 10 fundamental categories and each has been given a rating out of 5 stars. From this, I have arrived at a combined stock rating for the company.
This is the summary of the analysis. You can read the detailed analysis with the excel models on my blog (Check the source link)
Source: Aurobindo Pharma Fundamental Analysis and Future Outlook
Some insights for the coming years from management discussion & analysis (MD&A) and con calls are as follows.
- Novartis AG recently scrapped the $1 billion sale of its US generic pill and skin drug assets to Aurobindo pharma. The deal was in the pipeline but then collapsed due to the U.S. Federal Trade Commission’s not giving approval within expected timelines. The cancellation leaves hydroxychloroquine, an older malaria drug in Novartis’s Sandoz generic unit’s portfolio.
- The R&D spend guidance was at 5–6% of sales mainly towards complex product development. However, this might get delayed as the company will try to preserve cash in the uncertain times due to Covid-19 outbreak.
- Gross Margins were impacted last year due to the integration of the Apotex business, which has relatively lower margins. The company is looking forward to converting the loss-making Apotex operation to EBITDA neutral by year-end FY 2021.
- EU formulation grew 19% YoY in constant currency terms during the third quarter of FY 2020. There is further expansion on the way into the European Union but margins are expected to remain flat.
The company has expanded rapidly but this has led to the deterioration of its financial health. Further, the company is looking into expansion in oncology and other generic dosage forms but the growth will remain flat until the global supply chains are restored.
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