Aurobindo Pharma’s US business is expected to stage a marked improvement. A mix of factors, which includes a sturdy pipeline of new products, expected traction in the lucrative injectables space driven by strong new product pipeline and commissioning of a new facility coupled with growth in the recently launched products would boost US business’ sales. Aurobindo Share price today is Rs 877, up Rs 7 or 0.8%.

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Aurobindo Pharma plans to launch around 50 products in the US in FY2021 and expects to sustain the launch momentum into FY2022E as well. The new launches would include the injectables as well, which are a key growth driver. In the injectables space the company has 70 assets under development, 50 assets under review and 80 approved products, thus pointing towards a sturdy product pipeline which would unfold going ahead.

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With the demand from Europe and emerging markets also picking up, Aurobindo Pharma is setting up a green field plant at Vizag to capitalize on this opportunity and be able to cater to the incremental demand. The said plant is expected to be ready within the next 15 months.

Also, recent reports suggest a pick up in the complex generic space with the overall industry size likely to increase to around $20bn over the next 3 years from around $15-$16 bn now. Aurobindo Pharma currently has a small presence in the complex generics space, but is looking to enhance its presence gradually in the segment by focusing on areas of biosimilars, inhalers, transdermal patches and Injectables, which bodes well from a growth perspective.

The expected commissioning of a 450 mn dose vaccine capacity by end of June 2021 provides a new growth avenue for Aurobindo Pharma. Successful clearance from USFDA for its plants is awaited as the company has submitted its responses. Over the long term, a focus on building and developing a strong portfolio of specialty products (biosimilars, oncology, inhalers, transdermal patches, etc) would be key growth drivers.

Technically, Aurobindo Pharma is trading above 200EMA, indicating that the stock's positive long-term trend is likely to continue. Recently Aurobindo Pharma has bounced back from the short-term support of 50 DMA and is currently trading into a rising channel. Ashis recommends a buy above Rs 875. Ashis expects a Target of Rs 1020 from a medium-term perspective with a Stop Loss of Rs 790.

Aurobindo Pharma’s Key Risks:

Delay in resolution of USFDA issues and product approvals; change in regulatory landscape; and negative outcome of key facility inspection by USFDA can affect earnings prospects.