Aurobindo's strong run to continue

New product approvals and launches in the US are leading to better growth

Aurobindo Pharma continues to show resilience, despite Indian pharmaceutical firms Sun Pharma, Lupin, and Dr Reddy’s taking a beating on the exchanges. At Monday’s close of Rs 847, the stock is lower than its all-time high of Rs 861, which it reached last month. Analysts see more gains on the back of improving business outlook.

Aurobindo has not seen any stress over approvals for launches, nor does it see any US regulator issues deterring its growth in the US, the world’s largest health-care market. After a strong September quarter performance and looking at the company’s pipeline for launches in the US, many analysts have upgraded their target price for the stock.

Analysts at HSBC have upgraded it from Rs 901 to Rs 955, while IIFL has assigned a two-year target price of Rs 1,220. Aurobindo’s US formulations (about 44 per cent of total revenues) saw a 26 per cent growth as it received 13 approvals for launches in the quarter ended September.

Further, approvals continue to flow as it recently got one for the launch of generics of Sildenafil (for pulmonary arterial hypertension). There are other approvals, too, that the company has received for larger products like generics of Evista (for osteoporosis treatment), Baraclude (hepatitis B drug), and Abilify (psychotropic drug, which affects mental state) in the recent past.

Since the products have been recently introduced in the US, their contribution should be material in the second half of the financial year, say analysts at HSBC. The firm has emerged as one of the top Abbreviated New Drug Application filers, says Sarabjeet Kour Nangra at Angel Broking, who adds that it has been an aggressive filer in the past few years.

Further, over three years, there are about $70 billion-worth drugs going off patent in the US and Aurobindo is well-placed to take advantage, says Nangra. It is not about approvals and launches for generics, but the complex molecules and injectables portfolio the company is building.

IIFL’s analysts say, “Injectables portfolio would also get a leg up from complex filings in peptides, penems, oncology, and hormones in the near term. An Angiomax approval can make a meaningful contribution.” The over-the-counter business is shaping well in the US, after the Natrol acquisition last year. The Actavis buy in Europe is likely to become profitable by the next financial year, say analysts.