Aurobindo Pharma shares gain on US FTC nod for Lannett deal; Here's what it needs to do

According to management, the products being divested contribute an estimated $5 million to $10 million in annual revenue, implying a limited financ...

Summarized by AI ⓘ

What is the story about?

Shares of Aurobindo Pharma Ltd. gained as much as 2% on Friday, June 19, after the company announced plans to divest four generic pharmaceutical products as part of the regulatory process to complete its proposed $250 million acquisition of US-based Lannett Company.

The company said the products will be divested to Quagen Pharmaceuticals to address regulatory requirements linked to the transaction.

According to management, the products being divested contribute an estimated $5 million to $10 million in annual revenue, implying a limited financial impact from the sale.

The four products being divested are:

Mycophenolate mofetil oral suspension, an immunosuppressant used to prevent organ transplant rejection.
Niacin extended-release tablets, prescribed for cholesterol management and treatment of niacin deficiency.
Pilocarpine tablets, used to treat dry mouth in patients undergoing radiation therapy or suffering from Sjögren's syndrome.
Rabeprazole sodium delayed-release tablets, used in the treatment of acid-related gastrointestinal disorders such as GERD and duodenal ulcers.

Management said that Respirant, a key respiratory product licensed by Lannett with an estimated market opportunity of $1.2 billion to $1.4 billion, remains part of the acquisition and continues to be a major growth driver.

Aurobindo expects to significantly improve operational efficiency at Lannett following the acquisition. The company said current capacity utilisation stands at roughly 30%, with Lannett generating annual revenue of around $300 million and EBITDA of $40 million to $45 million.

Management expects capacity utilisation to increase to 70-75% over time. In a bullish scenario, EBITDA could rise to $70 million-$75 million over the next two to three quarters as utilisation improves to 60-70%.

The acquisition is expected to strengthen Aurobindo's presence in the US generics market and provide opportunities for operational synergies and margin expansion.