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The stock of Aurobindo Pharma rose 12 per cent last week, reacting to news that the company has entered into an agreement with Sandoz Inc, US, to acquire its dermatology and oral solids businesses for a cash consideration of $900 million.
The acquisition enhances Aurobindo’s product offerings and provides it a market-leading dermatology franchise, comprising a portfolio of generic and branded products. The deal is expected to add approximately 300 products to Aurobindo’s existing portfolio.
The acquisition will enhance Aurobindo’s pipeline — a total of 487 ANDA filings as on June 2018. The company has guided for sales of $900 million in the first 12 months. The acquisition will be fully funded by debt. The company’s net debt-to-equity ratio of 0.4 may increase to around 0.6 due to the acquisition. Despite the rise in the stock price, valuations are not expensive at around 19 times trailing earnings.
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