1. Maintain ‘buy’ on Aurobindo, stock to re-rate

Maintain ‘buy’ on Aurobindo, stock to re-rate

Aurobindo started FY17 in the same way as it spent most of FY16 — announcing two more approvals on day one of FY17.

By: | Published: April 7, 2016 12:14 AM

Aurobindo started FY17 in the same way as it spent most of FY16 — announcing two more approvals on day one of FY17. One of them (Valcyte) is another indication of the improving quality of approvals and is likely to be a key contributor to revenues & profitability. We reiterate that the sheer size and breadth of its ANDA portfolio (215 final, 36 tentative, 170+ pending) along with cost competitiveness make it an increasingly relevant counterparty for trade. With the full upside from FY16 approvals to reflect over the next few quarters and continuing turnaround in EU, we expect earnings growth to remain robust and the stock to re-rate. Maintain ‘buy’.

After close to 50 ANDA approvals in FY16, Aurobindo received two more on day one of FY17 — for Valcyte ($381 m annual sales) and Vancomycin HcL injection ($94 m annual sales). gValcyte, in particular, is an interesting approval — Dr Reddys was the only player in the market before Amneal and Aurobindo got approvals over the last couple of weeks. We expect this product to be one of the key contributors to growth over the next few quarters. Vancomycin Hcl injection takes its general injectables approval count to 30 (incl two tentative) in addition to those it sells from Unit XII. Aurobindo now has 251 ANDAs approved (215 final, 36 pending) and over 170 pending approval. It has the largest pipeline among Indian firms, ranks only second to Sun Pharma in terms of approved products and is third (behind Sun & Dr Reddys) in terms of US revenues.

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