Q2FY24 Review: Aurobindo Pharma: Robust pipeline of growth levers

13 Nov 2023 , 01:58 PM

Aurobindo’s Q2 Ebitda, adjusted for lower R&D spends, was 5% ahead of analysts of IIFL Capital Services estimates driven by higher API sales. While generic injectable sales in the US was flat QoQ, solid growth in the OSD portfolio on the back of new launches and volume growth led to 7% cc QoQ growth in overall US sales. Aurobindo has an interesting pipeline of growth levers going ahead with 40 new launches targeted p.a. in the US, Revlimid contribution kicking-in from Oct’23, and the new Pen-G API & China plant expected to begin commercialization by the end of Mar’24. Although analysts of IIFL Capital Services don’t expect Aurobindo to materially benefit from its first wave of biosimilar launches given delayed timelines vs peers, a potential biologics CDMO contract with MSD could propel Aurobindo into the large growing market for biologics contract manufacturing from FY27. Analysts of IIFL Capital Services upgrade FY25/26ii Ebitda by 4-6% and expect Aurobindo’s exRevlimid Ebitda to grow at 8-10% Cagr over H1FY24-26ii. Maintain ADD rating (TP Rs1050, pegged at ~18.5x 2YF ex-Revlimid EPS). 

Revlimid will start contributing from Q3FY24: 

US sales increased 7% cc QoQ from USD382m to USD409m, led by OSD portfolio growing 8% QoQ. While generic injectables sales in the US was flat QoQ at USD80m, mgmt indicated that sales can ramp-up to USD90-95m going forward with new launches. Eugia’s global sales was USD249m in H1 and mgmt has reiterated its FY24 sales guidance of USD560m led by Revlimid launch from Oct’23. Analysts of IIFL Capital Services forecast Revlimid to contribute USD50/120/140m over FY24-26 & expect Aurobindo’s base US business to clock 6-7% Cagr over H1FY24-26. 

Several new expansion projects will get commissioned soon, with the Pen-G API & China plant expected to begin commercialization by end Q4FY24/early Q1FY25. 40-50% of Aurobindo’s Pen-G API capacities of 15K TPA will be consumed internally and analysts of IIFL Capital Services expect Aurobindo’s external Pen-G API sales to be USD100/150m in FY25/26ii assuming pricing of USD20/kg. The new China plant and the Vizag plant will help to scale-up injectable supplies in the EU market and will aid to improve EU margins of mid-teens. 

Biologics CDMO revenue to commence from FY27: 

The biologics contract manufacturing market is expected to be USD30-40bn market by 2030 and Aurobindo is setting-up two 15KL bioreactors, with capabilities for both drug substance & fill-finish. The plant will be commissioned in FY26 and revenue is expected to begin in FY27. Aurobindo’s negotiations with MSD for the biologics CDMO contract is also likely to conclude by Mar’24