Aurobindo Pharma (ARBP) recorded ~ 7% q-o-q decline (down ~13% y-o-y) in the US base business for Q3, leading to concerns about the US business growth outlook.
We believe this a one-off event as the company faces least product concentration risk among peers. No single product for ARBP contributes more than 3% of sales (unlike SUNP, LPC and DRRD where the top three products account for >20-25% of sales).
Also, no single ANDA has any meaningful disproportionate contribution to margins as ARBP has a matured product basket, with all of its ~190 launched ANDAs facing competition from multiple players. Over next 6-9 months, three key formulation plants are getting commissioned, including Vizag (dedicated supply to EU), Unit XVI (antibiotic injectable plant to supply to US) and Naidupet (oral solids plant to supply to US).
ARBP received 49 and 47 ANDA approvals in FY16 and 9MFY17, respectively. (highest in the industry). We expect this strong approval and launch momentum to continue on the back of ~159 pending ANDAs. We expect ARBP to deliver mid-teens growth in the US, led by its strong launch pipeline in injectables (~40 pending ANDAs), steady mid-teens growth in Natrol and huge capacity expansion in orals and injectables (which will lead to volume push in existing and new products).
We expect US sales to pick up over the coming quarters, led by key launches like Epzicom, Meropenem. Tenofovir, Toprol XL and Fortamet Solu-Medrol.
