Aurobindo Pharma gains 12% after USFDA issued EIR for Hyderabad facility

Shares of Aurobindo Pharma gained 12 per cent to Rs 406 on the BSE on Friday, after the company announced that its Hyderabad-based facility has received an Establishment Inspection Report (EIR) with Voluntary Action Initiated (VAl) status from the US FDA. The stock of drugmaker was trading higher for the fourth straight day and has rallied 38 per cent during the period.

“The company’s Unit VIII, active pharmaceutical ingredient (API) manufacturing facility located at Gaddapotharam, Hyderabad, has received the Establishment Inspection Report (EIR) with Voluntary Action Initiated (VAl) status from the United States Food and Drug Administration (US FDA),” Aurobindo Pharma said in a exchange filing.

On 6 November 2020, the company, in a regulatory filing, said that the USFDA had inspected its Unit VIII, API manufacturing facility at Gaddapotharam, Hyderabad from 21 to 25 October 2019. At the end of the inspection, Aurobindo was issued a 'Form 483' with 4 observations for the said facility.

However, analysts at Nirmal Bang Equities expect the company's January-March quarter (Q4FY20), earnings to be lower than its estimate, due to delay in closure of Sandoz transaction. In addition, Aurobindo pharma key injectable asset in the US (ertapenem) is witnessing incremental competition and hence expects some downward pressure in their injectable sales.

The brokerage firm revised its FY20 EPS forecast to 44.8 from 48.7. The revised valuation multiple reflects caution on account of risk to business led by compliance issues at its large manufacturing facilities (Unit IV and Unit VII) and delay in closure of Sandoz transaction is an additional setback as the acquired business is declining.

The stock of Aurobindo Pharma had hit a 52-week low of Rs 281 on Monday, March 23, and has corrected 53 per cent from its high of Rs 602 touched on February 19, 2020.

At 11:44 am; it was trading 8 per cent higher at Rs 389, against 0.72 per cent decline in the S&P BSE Sensex. A combined 3.8 million equity shares changed hands on the counter on the NSE and BSE so far.