Aurobindo pharma Q2 profits were gravely hit by decline in generic prices in the US, net profit declined by 13.5% YoY and 9.5% QoQ

In Q2FY22, the company generated net profit of Rs. 6,970mn, down by 13.5% YoY and down by 9.5% QoQ. This effect mainly came from the elevated generic price erosion in the US as channels try to liquidate excess stocks, putting pressure on prices. 

However, US sales grew 7.2% YoY and 10.2% QoQ at US $401m on volume gain in existing products and new launches from the acquired portfolio stood at US $9m sales and Base generic sales (excluding injectables and Natrol) at US $310m grew 8.9% YoY and 13.1% QoQ while generic injectable sales at US $68m grew 5.9% YoY and 9.5% QoQ. Global generic injectables sales were at USD105m (USD68m from the US) in 2Q.

The company has filed for 27 ANDAs including 5 injectables during 2Q (35 filings in 1HFY22 including 7 injectables) and plans to file another 50-55 filings each year for next two years. The company received final FDA approvals for 7 ANDAs including 2 injectables in 2Q which makes a total of 11 approvals in 1H including 5 injectables). It launched 6 products including 3 injectables in 2Q which totals to 11 launches, including 3 injectables during 1HFY22.

The revenues from European markets stood at Rs. 16.6bn and grew 9.7% YoY and 5% QoQ. According to ARBP, there’s still a lot of potential for sales growth in Europe mainly on account of improving capacity utilization (including the penem block), increasing supplies from India (including generic injectables from Unit 4) and rising filings for oncology products (55 dossiers filed of which 12 are approved. There’s also been improvement in profitability for Europe sales with current operating margins in mid-teens which were only in single-digit margins in previous year. 

For Q2 segment wise, RoW revenues stood at Rs. 3.9bn which declined 13.5% YoY on a high base while the sales grew at 17.3% QoQ on patient volume recovery, ARV revenues stood at Rs. 1.5bn which declined at 71.2% YoY and 51.1% QoQ due to lower demand on higher procurement by channels in previous year amid COVID-19 uncertainties and API revenues stood at Rs. 7.8bn which declined 5.8% YoY and 3.9% QoQ on lower demand.

Moving forward, it is estimated that the US segment (~50% of revenues) would remain steady despite visible challenges, the generic sales (excluding injectables) would grow at single-digit sales on account of consistent new launches and volume gains in launched products, and injectables portfolio could also hold strong growth on new launches and patient footfalls recovery in key markets. The company reaffirmed its goal of achieving global sales of US $650-700m from generic injectables by FY24 through portfolio and capacity expansion. Capacity utilization improvement (e.g. for penem block) and completion of Vizag plant should help injectables sales.