Aurobindo Pharma hits 52-week low, slips 25% in one month

Shares of Aurobindo Pharma hit a fresh 52-week low of Rs 728.50 as they fell 3.4 per cent on the BSE in intra-day trade on Tuesday. The stock of the pharmaceutical company has declined 12 per cent in the past three trading days after the company reported a disappointing operational performance in the June 2021 quarter (Q1FY22), amid a decline across the US market and antiretroviral (ARVs). The stock of the pharmaceutical company was trading at its lowest level since June 2020. In the past one month, it has lost 25 per cent, as compared to a 4.4 per cent rise in the S&P BSE Sensex.

In Q1FY22, the company’s profit after tax (PAT) was down 1.7 per cent year-on-year (YoY) and 4 per cent quarter-on-quarter (QoQ) at Rs 770 crore. It was, however, in line with analysts' estimate on higher than expected other income and a lower tax rate. Revenue, meanwhile, de-grew 3.8 per cent YoY and 5 per cent QoQ to Rs 5,702 crore.

US revenue in Q1FY22 declined by 1.5 per cent YoY to Rs 2,681 crore, accounting for 47 per cent of consolidated revenue. ARV business revenue for the quarter was at Rs 296 crore, down 30.3 per cent YoY, and accounted for 5.1 per cent of total revenue. Ebitda (earnings before interest, taxes, depreciation, and amortization) margins remained flat at 21.2 per cent.

Separately, Aurobindo Pharma said the company has entered into definitive agreements under which the company will subscribe to fresh equity shares in Cronus Pharma Specialities India Private Limited (Cronus) amounting to Rs 420 crore.

Cronus is a Hyderabad based generic veterinary pharmaceutical products company engaged in the development, manufacturing and sale of veterinary pharmaceutical products. Subsequent to this investment, the company will own 51 per cent of the equity share capital of Cronus, Aurobindo Pharma said.

"The price erosion in the US was in high single-digit, but this would normalise, going forward (H2FY22). Aurobindo’s US pipeline provides good growth visibility with assets across injectables, biosimilars, vaccines and OTC products," analysts at HDFC Securities said in the result update.

Its recent acquisition of Cronus Pharma (animal health business) and OTC/brands in the US are expected to accelerate growth, the brokerage said, adding that the potential value unlocking of the injectables business (disclosure in Q2FY22) and resolution of US FDA facilities are the key near-term triggers.

"On the regulatory front, while a few other plants still remain under the USFDA scrutiny, the erstwhile clearance of a critical plant (Unit IV) indicates that the company continues to work towards stricter adherence. That said, the US generics scenario is anything but encouraging at the current juncture due to persistent base business price erosion and slower injectables ramp-up," analysts at ICICI Securities said.