MOSL: AUROBINDO PHARMA (Buy)-Enhances specialty portfolio by acquiring Spectrum’s oncology products
Aurobindo Pharma: Enhances specialty portfolio by acquiring Spectrum’s oncology products; Deal attractively valued
(ARBP IN, Mkt Cap USD6.4b, CMP INR775, TP INR940, 21% Upside, Buy)
- Aurobindo Pharma (ARBP) would acquire seven marketed oncology products, intellectual property and commercial infrastructure from Spectrum Pharma for a consideration of USD300m, which includes an upfront payment of USD160m and a milestone-linked payment of USD140m.
- The acquired portfolio is expected to have contributed USD105m to Spectrum in CY18, implying an attractive valuation of EV/sales of ~1.5x (EV based on upfront payment only).
- We note that a few of these products are under patent. Also, synergy benefit would accrue as ARBP will use its own platform to market the products, thereby reducing costs. Accordingly, we believe that the acquired portfolio would have margins that are much higher than ARBP’s consolidated EBITDA margin.
- We raise our FY20/21 EPS estimate by 2%/2.7% to INR60.5/INR63.8 and revise our target price to INR940 (prior: INR920), based on 15x 12M forward earnings, to factor in this acquisition. Maintain Buy.
Aurobindo Pharma is a vertically integrated pharmaceutical group based in India. Co. maintains a product portfolio spread over major product areas encompassing CVS, CNS, Anti-Retroviral, Antibiotics, Gastroenterologicals, Anti-Diabetics and Anti-Allergic with approved manufacturing facilities by USFDA, UKMHRA, WHO, MCC-SA, ANVISA-Brazil for both APIs & Formulations. In addition to Semi-Synthetic Penicillins, Co. has a presence in key therapeutic segments such as neurosciences, cardiovascular, anti-retrovirals, anti-diabetics, gastroenterology and cephalosporins, among others. Co. exports to over 125 countries across the globe.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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