Aurobindo Pharma Shares Fall To Lowest In A Year On Q2 Profit Miss

Aurobindo Pharma's Q2 net profit declined 41% year-on-year to Rs 409 crore.

<div class="paragraphs"><p>(Source: Unsplash)</p></div>
(Source: Unsplash)

Shares of Aurobindo Pharma Ltd. declined to its lowest in a year during morning trade, after its second-quarter profit missed estimates.

The Hyderabad-based bulk and generic drugmaker’s net profit declined 41% year-on-year to Rs 409 crore in the quarter-ended September, according to its exchange filing. That compares with the Rs 599-crore consensus estimate of analysts tracked by Bloomberg.

Aurobindo Pharma Q2 Highlights (YoY)

  • Revenue was down 3% to Rs 5,739 crore, against an estimate of Rs 6,257 crore.

  • Ebitda was down 30% at Rs 837 crore, against the Rs 1,026-crore forecast.

  • Margin stood at 14.6% against 20%. That compares to the analyst forecast of 16.4%.

In the post-earnings call, the management deferred revenue guidance on the specialty portfolio by a year.

Shares of the company opened 4.7% lower on Monday, post announcement of its second-quarter results on Saturday. By 1:10 p.m., it had pared most of its losses after hitting a 52-week-low during morning trade.

Here are the highlights from its management call:

Outlook On U.S.

The U.S. market, contributing 46% to the overall revenue of the company, saw sales fall 11% year-on-year due to price erosion, shelf stock adjustment and drop in volumes. The company saw a decline in volumes of its top 20 products.

However, the management said that it was a one-off quarter with sales expected to come back to normal run rate. It expects the oral solids generic market to be competitive for the next few quarters.

The management is hopeful of recovery on the back of 40 launches and Unit 7 clearance. Amid flu season, the demand for antibiotics has surged.

Guidance On Specialty Portfolio

The management pushed back its guidance of $650-700 million on the specialty portfolio (including gRevlimid sales) by one year to FY25.

Currently, the global injectable sales for the quarter stands at $100 million. gRevlimid sales are expected to start in H2 FY24.

The company's U.S. subsidiary, Eugia Pharma, saw a volume decline of 20% in its injectables business. It has also witnessed price erosion in single digits.

Other Highlights

  • The company saw a strong growth in Canada for the quarter.

  • Margins in Europe improved by 10-30 basis points, with 5-7% growth expected.

  • The company aims to launch over 20 products this fiscal, and expects limited-competition product launch starting from next week.

  • Oncology products' revenue will be meaningful by late FY24 to early FY25.

  • The company is investing Rs 300 crore for biosimilar manufacturing bioreactor. Three biosimilars in Phase-3 trials are progressing as desired. The company expects U.S. FDA filing in November 2023 (FY24).

  • Vizag facility construction is complete and lines are under qualifications. Filings are expected to start in H1 and generate revenue in FY24 for all markets.

  • It has completed the U.S. plant project and the exhibit batches. Filings are expected to start in Q1 FY24. The company has a pipeline of 20 products and will file three products each quarter.

  • R&D spends are slated to increase as the clinical trials start. R&D expenses are expected to be around 6% for the next two quarters.

  • The company has net cash of $337 million. It is expected to deploy $235 million towards PenG project and to bring down the current gross debt of $400 million. Pilot of the project will start in October 2023 and it should be completed by March 2024.