Company Update | Pharmaceuticals
January 18, 2019
Acquires branded oncology products
Aurobindo Pharma’s subsidiary Acrotech Biopharma has acquired portfolio
of seven marketed oncology injectable products from Spectrum
Pharmaceuticals. Aurobindo Pharma Limited will be acquiring the portfolio
on a debt free and cash free basis. The acquisition will help Aurobindo to
enter the branded oncology market with a range of products, which are
Market Cap (` cr)
well recognized by the oncology Industry. The portfolio is expected to
Net Debt (` cr)
generate a revenue of around US$100mn for the first 12 months after
52 Week High / Low
completion of the transaction for Aurobindo. Acquisition will be for an
Avg. Daily Volume
Face Value (`)
upfront purchase price of US$160mn in cash plus up to US$140mn on
achieving regulatory and sales-based milestones. Acquisition values the
acquired company at 1.6xMarketCap/sales (on upfront payment), which
we believe is attractive. The acquired business, as guided by the
Management has EBDITA margins better than APL (20-22%), making the
Shareholding Pattern (%)
deal attractive in terms of payback also. Transaction is expected to be
MF / Banks / Indian Fls
accretive to normalized EPS from first full year of ownership and will
FII / NRIs / OCBs
augment the net profit growth by 3% on a full year basis (as the acquired
Indian Public / Others
entity). We maintain a Buy with a revised target of `890.
Adds branded portfolio to the company:
Aurobindo Pharma’s subsidiary
Acrotech Biopharma will acquire portfolio of seven marketed oncology
injectable products from Spectrum Pharmaceuticals. The acquisition will help
Aurobindo to enter the branded oncology market with a range of products,
which are well recognized by the oncology Industry. Thus with this the
branded injectable business will be around 3% of sales in FY2020E. The
portfolio is expected to generate a revenue of around US$100mn for the first
12 months after completion of the transaction for Aurobindo. With this,
Aurobindo will also acquire a well-established and experienced branded
commercial infrastructure to continue commercializing these brands.
3-year price chart
Niche product portfolio:
The acquired portfolio of the injectable includes
Fusilev (levoleucovorin), Folotyn (pralatrexate injection), Zevalin
(ibritumomab tiuxetan), Marqibo (vincristine sulfate liposome injection), and
Beleodaq (belinostat) for injection, Evomela (melphalan) for injection and
Amongst these products, almost 70% of sales is accounted by two products;
namely Folotyn (pralatrexate injection) & Evomela (melphalan) for injection.
Source: Company, Angel Research
In addition, while
Fusilev has seen generic competition,
(levoleucovorin) has been launched last year and hence has scope of
enhancing the sales of the company. These products of the company are in
the niche segments witnessing a growth of 3-4% pa; however, its two big
products (Folotyn (pralatrexate injection) & Evomela (melphalan)) enjoy
Sarabjit Kour Nangra
market share of around 20% & 44% respectively. In addition, most
022-39357800 Ext: 6806
importantly these two products do not face patent expiry until 2026/27.
Please refer to important disclosures at the end of this report
Apart from these products, the deal has potential to add to the expected
sales. Under the terms of the deal, Aurobindo will make US$160mn up-front
cash payment and up to US$140mn in milestones as listed below. Thus, the
deal provides for further enhancement of sales, which could accrue from
further R&D efforts for products Marqibo & Khapzory respectively.
$30mn for FDA Product Approval for MARQIBO with label indicated for
diffuse large B-cell lymphoma
$10mn for FDA Product Approval for MARQIBO for any indication other than
the B-Cell Lymphoma Indication, single vial or pediatric ALL
$30mn for Net Sales of MARQIBO during any trailing twelve (12) month
period during the Milestone Period are equal to or greater than $300,000,000
$10mn for Net Sales of MARQIBO during any trailing twelve (12) month
period during the Milestone Period are equal to or greater than $400,000,000.
$5 million for Net Sales of KHAPZORY during any trailing twelve (12) month
period during the Milestone Period are equal to or greater than $50,000,000
$5 million for Cumulative Net Sales of KHAPZORY are equal to or greater
than $150,000,000 at any time during the Milestone Period
$10 million for Cumulative Net Sales of KHAPZORY are equal to or greater
than $200,000,000 at any time during the Milestone Period
$15 million for Cumulative Net Sales of KHAPZORY are equal to or greater
than $300,000,000 at any time during the Milestone Period
$25 million for Cumulative Net Sales of KHAPZORY are equal to or greater
than $400,000,000 at any time during the Milestone Period.
The milestone period lasts for five years post the closing of the transaction.
KHAPZORY milestones only payable in the event KHAPZORY is assigned a
Outlook & Valuations:
On valuation front, the company paid almost
1.6xMarketCap/sales (on upfront payment), which we believe is very attractive.
The addition whole US$140mn will be paid up if the sales for the two said above
products reach US$800mn; which we believe is attractive. On the Operating
front, the company guided that the acquired business has OMP is better than
company’s current OPMs (around 20-22%). It’s an all cash deal and company
has guided that it will take 90 days for such deals to be integrated, so mostly it
will start reflecting in FY2020. We believe that the deal can add almost ~`3% on
EPS growth in FY2020, with major benefits reflecting in FY2021 (when the ramp-
up of sales can enhance the profitability of the company). Given the
opportunity and Aurobindo Pharmaceuticals position in the global generic, we
believe that the company still should give decent upsides on the stock.
we maintain our buy with a price target of `890.
January 18, 2019
Y/E March (
EBITDA Margin (%)
Source: Company, Angel Research Note: CMP as of January 17, 2019 FY2020 includes the acquired
January 18, 2019
Research Team Tel: 022 - 39357800
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