USFDA finds several violations in Aurobindo unit
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Q3FY20 Results:
6% increase in profit before tax (PBT) YOY, driven by a healthy revenue growth in the US market.
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Revenues grew 11.9%.
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The formulations revenues posted a growth of 17.4% yoy (which accounts for 86.6% of the total revenues)
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US formulations revenues grew by 22%, accounting for 50.6% of the consolidated revenues
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Europe Formulations revenues grew by 14.2%
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API revenues declined 14.3% (13.2% of the total revenues)
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Growth markets posted a marginal 1.6% growth in revenues.
Process quality observations are continuing!
Most of the pharma companies which are into formulation and API will face Raw material shortage because of corona impact in china . Need to see if Aurobindho is importing raw materials from china
The bigger issue for me is capital allocation. Prior to the expansion the company had lower topline but higher net profit.
Post expansion in the recent quarters, the ebitda improved but net profit was dragged down by interest cost and depreciation. This means that the capital has not been allocated towards higher ROI. I don’t see anywhere that the margins are likely to improve to justify the higher capex. The revenue needs to increase to maintain the margins and profit growth.
This is possibly why valuations are down.
Aurobindo Pharma got a huge relief with its Unit IV, an injectables plant located in Hyderabad, receiving an establishment inspection report (EIR) from the US Food and Drug Administration (FDA).
An EIR with voluntary action indicated status means the FDA is not likely to take any action, which could otherwise have hampered drug supplies to the US from this facility
Does this mean that new approvals will come from unit IV
Unit 4 accounts for most pending drug approvals (46 pending approvals ie 30% of overall) and this unit contributes more than 10% to aurobindo’s overall sales and about 20% of US sales.
Unit 4 has remained more important, with contributions from highly complex products at stake. also products from other units can still be outsourced or transferred to another site, but the same is not possible for injectables and ophthalmics being produced from unit 4.
src: business std.
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Sebi should ask for the original FDA letters to ensure that this wasn’t a price manipulation exercise.
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One more:-
USFDA inspection of Unit VIII, API manufacturing facility at Gaddapotharam, Hyderabad, of the company, has received the Establishment Inspection Report (EIR) with Voluntary Action Initiated (VAl) status from USFDA.
Sandoz deal is terminated
The Q4 numbers look great and are significantly better than even the most optimistic estimates on both topline and bottomline fronts. March was the period when highest disruption was expected for industries with dependencies on China for raw material (APIs in this case). A strong show despite this seems like a big positive.
Any thoughts from other boarders?
Disc: Invested
They had mentioned in the previous investor call that they had adequate inventory to tide over the short term, and only if the problem in China persists longer, then they would face raw material availability issues.
Aurobindo has a large US portfolio and is likely to benefit from the prevailing drug shortages.
Also with Sandoz not happening, debt overhang is also gone. The company is reducing debt (details in investor ppt) and there is a investor call today at 5.30pm.
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Can some one please share latest concall transcript, thanks
---------------Quote------------------
The Company and the promoters have in order to buy the
peace, made settlement applications on 25 October 2019
before SEBI without admitting or denying any violation for
settlement of the matter pending before SAT and also on WTM
SCN. Accordingly, a meeting with Internal Committee of SEBI
was held on 5 February 2020. The SEBI on 16 April 2020 has
communicated its acceptance to the settlement proposal of the
Company and its promoters. Accordingly, on 30 April 2020 the
Company has paid 22 million and the promoters cumulatively have paid 198.2 million to SEBI towards settlement amount of
the above matter
---------------Un-Quote------------------
This is in FY1920 AR…Is this needs to be worried about?
FY21 Q1 results declared. PAT 714.68 cr. Not sure if the valuations are justifed though.
Can someone please advise why Q420 results are different on screener.in at 850 cr v/s AuroPharma’s statement showing 725 cr. Thanks
Disc: Invested and views may be biased.
Superb…YOY… Standalone net profit is up by more than 100%, if I read correctly ! There is a marginal dip QoQ…
YOY Consolidated net profit is up by 23%… QoQ is just flat…
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According to screener around 6% of shares are pledged by the promoters. Is there a way to figure out whether this pledge has been done to raise money for the company or something else?
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Hi Paul,
Were you able to find any reasons for the pledge . I can see no further replies to your question . Please do let us know if you were able to.
Have not figured that yet.