Appearances can be deceptive and so can a name. One would expect a pharmaceutical company originating from Pondicherry to be calm and laidback. Aurobindo Pharma has been anything but that and its growth over the last three years seems powered by steroids. The stock is up 13X over the same period and investors continue to bid it up by the day.
After all, nobody is expecting the good times to end anytime soon. And why should they, given that the company is successfully transforming itself from a bulk drugs supplier to a formulations player? The contribution of APIs (active pharmaceutical ingredients) has shrunk from 42% in FY13 to 22% for the latest quarter ending FY15 and along with organic growth, the management is actively chasing inorganic growth, and even there, it seems to be getting maximum bang for its buck.
The right dose
Aurobindo has a pipeline of 380 ANDA filings
Consider its latest acquisition of Natrol Inc from Plethico Pharmaceuticals in a US bankruptcy court auction. At first, there was celebration and then followed litigation. According to a report in the Dow Jones Daily Bankruptcy Review, Aurobindo’s US arm accused Plethico of drafting a sham $25 million contract with a fictitious company prior to filing for bankruptcy. The dispute was settled soon after, with Plethico agreeing to pay Aurobindo a settlement of $23.3 million, thereby bringing down the cost of the $132.5 million acquisition.
This much-talked about November 2014 acquisition was part of the generics giant’s efforts to increase its footprint in the US, a market which contributes 50% of its revenue. The transaction gave Aurobindo a hold in the over-the-counter (OTC) segment. “Natrol comes with established nutraceuticals brands and an extensive distribution network consisting of retail pharmacy chains and specialty health food stores to expand market penetration,” said N Govindarajan, managing director, Aurobindo Pharma, while announcing the acquisition. This was the second successive deal for Aurobindo, which had, in April 2014, acquired Actavis Plc’s loss-