Aurobindo Pharma’s Stock Rises on Successful US FDA Inspection
Aurobindo Pharma’s Stock Rises on Successful US FDA Inspection
Investor confidence in Aurobindo Pharma Ltd. received a significant boost following the successful completion of the US Food and Drug Administration (FDA) inspection at two of its key units. This positive development led to a more than 1% increase in the company’s share prices during Monday’s morning trades, a day marked by overall red trading in the benchmark indices.
US FDA Approval: A Milestone for Aurobindo Pharma
The inspection by the US FDA was conducted at Unit-I & III, which are formulation manufacturing facilities of APL Healthcare Ltd., a wholly-owned subsidiary of Aurobindo Pharma. Located in the Mahabubnagar District of Telangana, these facilities underwent a Pre-Approval Inspection (PAI) from November 13 to 17, 2023. The inspection concluded with zero observations and was classified as “No Action Indicated” (NAI), signifying a high level of compliance with regulatory standards.
Strategic Importance of US Market for Aurobindo
The regulatory clearance by the US drug regulator is particularly crucial for companies like Aurobindo Pharma, which relies heavily on exports to the US. The US market forms a significant portion of Aurobindo’s total revenues, contributing more than half. The company’s prospects in the US market remain strong, backed by a promising pipeline of injectables and other products facing limited competition. Continued regulatory clearances are essential for maintaining the export of these products to the US.
Positive Outlook from Analysts
Analysts are maintaining a positive outlook for Aurobindo Pharma. A report by Axis Securities following the company’s results review highlighted several growth levers for Aurobindo, including generic injectables, the potential of Eugia (with expected low double-digit growth), and upcoming product launches like Trastzumab biosimilars and Pen–G injectable. Additionally, there is an anticipated one-time opportunity with generic Revlimid, which the company has already launched.
Upward Revision in Earnings Estimates
Motilal Oswal Financial Services, among other analysts, has raised its earnings estimates for Aurobindo Pharma for FY24 and FY25 by 6% and 5%, respectively. This revision takes into account the reduced price erosion in the base portfolio and improved operating leverage, indicating a strong outlook for the company in the coming years.
