Aurobindo Pharma calls off agreement to pick stake in Cronus; stock up 6%

Shares of Aurobindo Pharma zoomed 6 per cent at Rs 720.60 on the BSE in the intra-day trade on Monday after the company terminated the agreement to acquire 51 per cent ownership in Cronus Pharma.

Aurobindo Pharma, on August 12, 2021, had entered into binding agreements with Cronus Pharma Specialities India Private Limited for acquisition of 51 per cent ownership in Cronus Pharma by subscribing to 95 million equity shares of Rs 10 each at a premium of Rs 34.18 per equity share aggregating to Rs 420 crore.

Since August 12, in the past six trading days, the stock of Aurobindo has underperformed the market by falling 21 per cent on the BSE till Friday. It had hit a 52-week low of Rs 677 on August 20, 2021.

"The board of Directors, in its meeting held on Friday, August 20, 2021, has approved the termination of the aforesaid agreements and the parties have mutually agreed and terminated the said agreements", the pharmaceutical company said in an exchange filing.

Cronus is a pharmaceutical company developing, manufacturing and distributing generic veterinary pharmaceutical products. Cronus has a factory at Hyderabad with 67 products in its pipeline, of which 22 have been filed and 6 have been approved by the Centre for Veterinary Medicine, USFDA.

The acquisition would have provided Aurobindo Pharma a foothold in the $48 billion global animal health market. 

"With the termination of this highly debatable acquisition, the company has, for the time being, avoided further damage. That said, resurfacing of regulatory concerns and intensifying competition in the US are likely to remain an overhang in the near term," ICICI Securities said in a note.