Aurobindo Pharma shares weak after FDA action offsets strong Q4

Shares of Aurobindo Pharma fell marginally in morning trade as intimation of a US FDA action at one of its facilities offset good news in the form of strong results. Company shares fell 0.6% early after the company said the US FDA classified a Telengana-based unit of its subsidiary as ‘official action indicated’.

The company did not disclose specifics of what the classification would entail or the business impact on the facility from the action, saying “it remains committed to work closely with the US FDA and continues to enhance its compliance on an ongoing basis”.

The announcement offset any potential impact of Aurobindo’s strong FY24 performance.

On May 25, the company said its revenue from operations jumped 16.7% in FY24, from ₹24,855 crore to ₹29,002 crore while earnings before interest, tax, depreciation and amortisation (EBITDA) before forex and other income surged 55.5% to ₹5,843 crore. The company’s EBITDA margin expanded 5.03 percentage points to 20.1%.

In the last quarter of FY24, the company’s EBITDA before forex and other income jumped 68.3% to ₹1,687 crore on revenues of ₹7,580 crore (up 17.1% year-on-year). The company’s EBITDA margin rose from 15.5% to 22.3%.

The company said its Q4 revenue growth was bolstered by strong performance in growth markets (up 49.5% YoY) and US formulations (up 21.6%).

The company also received 17 abbreviated new drug applications (ANDAs) approvals from the FDA, including 4 specialty and injectable products.

Aurobindo shares have underperformed the BSE Pharma index over the past five years, rising only 81% compared to the index’s 167% gains.

This is because of the company’s muted annualised revenue growth of 5.5% over the past three years and negative profit growth of -15.9%.

But they have played catchup over the past one year, clocking gains of 99% compared to the index’s 51% rise after a recent turnaround in financial performance.

The company has said its strategic priorities include expanding speciality business through its Eugia Pharma subsidiary, accelerate its biologics portfolio, capitalise on the Indian government’s production-linked incentive (PLI) scheme and shore up presence in growth markets such as India and Indonesia.