Aurobindo aims for top-5 position in Europe

Firm eyes Euro 1 bn revenue in the continent, seeks to hike market share to 3% from 2% currently

Leveraging on a new acquisition and its existing product pipeline that includes potential launches of molecules going off-patent in the new year, Aurobvindo Pharma Limited is aiming to double its revenues in Europe to Euro 1 billion in the next 3-5 years.

"We want to become one of the top five companies in Europe from the 13th position at present. To get to the top-five level we need to increase our market share to three per cent from the present two per cent. In revenue terms, this will mean Euro 1 billion," Sanjeev Dani, chief operating officer and head of formulations of Aurobindo Pharma told the analysts on Monday.

Though the management has not set any targeted time line to achieve the new revenue milestone in its European operations, Dani was fairly hopeful of reaching the target in 3-5 years.

Explaining the company's broad strategy for the European market at an analyst call in connection with the acquisition of Portuguese firm Generis for Euro 135 million announced on Saturday, Dani said Aurobindo was in a position to achieve this revenue target without essentially looking for fresh acquisitions. Aurobindo has close to 200 products in the pipeline for Europea and its focus on regulated markets, primarily the US is also aiding its growth in the continent.

According to Dani, the year 2017 will have two major growth drivers for the company: its large product pipeline and the new off-patent opportunities in which the company hopes to acquire the first-to-file status for some.

The acquisition of Generis, which is currently the second largest generic company by value in Portugal, with a 227-product portfolio and another 51 products in the pipeline, is going to be fully leveraged in this endeavour. The unutilised 50 per cent capacity at Generis's manufacturing plant would be used for rolling out products that help get quick entry into tender markets, while the Aurobindo's existing strength in active pharmaceutical ingredients (APIs) would be used to exploit the cost arbitrage available with the existing products of Generis.

The company would also be switching and moving products based on these and other considerations in the course of next 9-12 months, they said.

To fund this acquisition Aurobindo would be taking a euro-denominated term loan at a lower-than-average rate of interest paid by the company on its existing loans, Dani said.

"We believe this transaction makes strategic sense for Aurobindo and the consideration paid is almost fairly reasonable," said IDFC Securities in its report on Monday.