Aurobindo Pharma has initiated talks with private equity funds to sell a stake of around 30-35% in its injectable business for ₹4,500-5,250 crore ($600-700 million), as the Hyderabad-based drugmaker plans value unlocking in its core businesses, people with direct knowledge of the matter said.
TPG Capital Management, Advent International, Bain Capital and Blackstone have been sounded off for a potential transaction, valuing the business at ₹15,000 crore. The Carlyle Group and PAG are the two other firms which have been reached out for a potential deal, the people said.
Aurobindo has hired Kotak Mahindra Capital to run the formal process to find a buyer.
Emails sent to Aurobindo and its managing director, KN Reddy, seeking comment remained unanswered at the time of going to press on Monday.
Co Setting up Injectable Facility in Vizag
TPG, Advent, Bain, Blackstone, Carlyle and PAG declined to comment.
In the July-September second quarter of this fiscal year, the company had posted global injectable sales of $105 million, and the management reiterated a $650-700 million annual revenue target by fiscal 2024 (excluding biosimilars and vaccines).
As part of expanding the injectable business, Aurobindo is setting up a dedicated injectable facility in Vizag for the European Union and other global markets, the company said in its latest annual presentation. Aurobindo has built a strong presence in injectables across delivery systems such as liquid and lyophilised vials, bags, ampoules, and prefilled syringes. It has completed the construction of an injectable facility in the US. The Vizag plant is expected to be ready for commercial production in the next 15-18 months.
In 2019, Aurobindo had acquired a portfolio of seven branded oncology injectable products from Spectrum Pharmaceuticals for $160 million in a deal that helped the company enter the branded oncology market in the US.
Last year, the company announced it would transfer its injectable assets to a wholly owned subsidiary, Eugia Pharma Specialities. The transfer of Unit IV, which makes generic injectables and ophthalmics, was done for a consideration of Rs 876 crore. The unit had posted revenue of Rs 926 crore in FY21 and accounted for 5.86% of the company’s turnover on a standalone basis. This move was seen as a precursor to other deals to unlock value.
According to analysts, Aurobindo trades at a discount to the large-cap companies in the sector and the move to consolidate all its injectable assets into one company is directionally a correct step, as the segment is fast growing and subsidiarisation of that business would help in value discovery.
Founded in 1986 by V Ramprasad Reddy and K Nityanand Reddy, Aurobindo is a vertically integrated pharmaceutical formulations manufacturer. It has 14 formulation manufacturing facilities (including three in the US and one each in Brazil and Portugal) and 11 API manufacturing facilities. The facilities have regulatory approvals from major international agencies.
The formulation business constitutes 88% of its revenue with exports contributing more than 90% to the sales. The US remains the key market with nearly half of the total revenue, supported by its strong pipelines for 681 generic drugs, Julius Baer said in a note on November 18. “Albeit the near-term headwinds, we remain constructive on Aurobindo’s prospectus, given its health product pipeline, low product concentration, expected increase in contributions from complex generics injectables and biosimilars, the improving profitability in the European business and current attractive valuations,” Julius Baer analyst Milind Muchhala wrote in a note to clients.
The injectable business has seen significant consolidation in the past over a decade.
In 2010, US-based Mylan had acquired Agila Specialities, the injectable unit of Bengaluru-based Strides Arcolab, for around Rs 10,000 crore in one among the big-ticket buyouts involving Indian pharma companies. In 2016, US-based Baxter International had acquired Claris Injectables, the wholly owned subsidiary of Ahmedabad-based Claris Lifesciences, for $625 million.
In November 2021, US-based Amneal Pharmaceuticals acquired Ahmedabad-based injectable drugmaker Puniska Healthcare for Rs 700 crore.
PE firms such as Advent, PAG and TPG too have been aggressive in the Indian healthcare and life sciences space by creating specific platforms for pharma investments. Private equity and venture capital funds invested $3.23 billion in healthcare sectors 2021 compared with $2.7 billion the previous year, according to data compiled by Venture Intelligence.
