Stocks

Aurobindo Pharma weathers scrapping of Sandoz deal

KS Badri Narayanan Chennai | Updated on April 09, 2020 Published on April 09, 2020

Shares of Aurobindo Pharma jumped even after it pulled out of the Sandoz deal. However, analysts remained cautious on the stock, downgrading it.

Novartis and Aurobindo Pharma last week announced the mutual termination of the agreement to sell the Sandoz US generic oral solid brands and dermatological business portfolio to Aurobindo.

US FTC approval

The primary reason identified was failure to obtain the required transaction approval from the US Federal Trade Commission (FTC) within anticipated timelines. The deal meant revenues of nearly $750-850 million with operating profit at 27 per cent (as disclosed by Novartis AG). Credit Suisse has downgraded the stock to ‘underperformer’ from ‘neutral’ and reduced the price target to ₹345 from the current ₹450.

According to it, the Sandoz deal was EPS accretive and an important catalyst for Aurobindo Pharma. With the Sandoz deal being called off, the company is now exposed to USFDA risks, CS said, and added the probability of further escalation of unit VII OAI flag still exists.

JP Morgan too downgraded the Aurobindo Pharma stock to ‘neutral’ from ‘overweight’ with a reduced target of ₹450 from its earlier target of ₹730. Similarly, Citi too cut the price target, but was somewhat liberal at ₹690. It had earlier fixed a target of ₹820.

Emkay Global believes that investors’ focus will now shift back to Aurobindo’s own portfolio, which is currently grappling with regulatory challenges in the US and likely to see moderate single-digit growth in the interim. USFDA flag for Unit IV is a key monitorable in the near term, said Emkay, which retained its ‘hold’ rating on the stock with a revised price target of ₹420.

Published on April 09, 2020

A letter from the Editor


Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.