[T.S.R:17510] Aurobindo Pharma-Weak Medicene

We lower our FY12-13e EPS ~7% to factor in impact of the import alert from the USFDA over unit VI. Further, a month after the import alert, Aurobindo has received another blow, from Pfizer's recall of a lot of citalopram and finasteride for mislabeling, though this is likely to have an insignificant financial impact. 

n       Pfizer's recall on mislabeling. Due to mislabeling, Pfizer's generic arm Greenstone has voluntarily recalled a specified lot of citalopram (10mg) and finasteride (5mg), supplied by Aurobindo. It is not yet clear whether the mislabeling was at Aurobindo or the distributor's end.

n       Recall unlikely to impact much. The value of the lot is ~US$10,000, implying insignificant financial impact. However, the two products are indicated for different categories and may have a severe impact in case the wrong medicine is consumed. This is more of a contingent liability and would weigh over valuations.

n       Revise estimates. We lower FY12-13e revenue by 1-3% and net profit by ~7%, factoring in loss of revenue owing to the import alert on Aurobindo in Feb '11. The high reduction in net profit estimates is due to expenses continuing despite nil revenue.

n       Valuation and risks. We expect valuations to be subdued in the short term due to the import alert and recall on mislabeling. Key risk: Delay/failure in execution of supply contracts with MNCs.
 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

 

 

 

 

 

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