Why Aurobindo Pharma Share Price is Falling

After a prolonged underperformance from 2016 to 2020, pharma stocks mounted a return in 2020 on the back of the Covid-19 epidemic.

However, when the sentiment waned, they displayed a mediocre performance. In the past year, many top pharma stocks have experienced significant corrections.

Due to problems, including price pressure in the US, strict regulatory requirements by the US Food and Drug Administration (USFDA), and delays in drug approvals, the pharmaceutical industry has underperformed.

One such stock that is losing its shine and has fallen sharply is Aurobindo Pharma.

Over a month, Aurobindo Pharma share price has plunged over 15%.

Let's find out why Aurobindo Pharma shares are falling.

Why Aurobindo Pharma Share Price is Falling

#1 Issue of form 483 for Unit 10

In November 2022, the USFDA (United States Food and Drug Administration) issued Form 483 with ten observations to unit - IX, an intermediate facility situated at Gundlamachnoor Village of Aurobindo Pharma.

Form 483 was issued to the firm's management on violations of the Food Drug and Cosmetic (FD&C) Act and related Acts. The observation is procedural and not related to the data integrity of the firm.

The inspections started on 10 November 2022 in Telangana and concluded on 18 November 2022.

Following this inspection, Aurobindo Pharma shares saw a sharp 3% drop in its share price intraday.

#2 Recalling drugs

In November 2022, the firm recalled 9,504 bottles of Quinapril and Hydrochlorothiazide tablets, a medication used to treat high blood pressure.

The drug callback was because there were deviations in the current good manufacturing process of impurity above the acceptable daily intake limit.

In September 2022, AuroMedics, a unit of Aurobindo Pharma, also called back 11,520 units of Fondaparinux Sodium Injection in the US market. This medication is for the treatment of deep vein thrombosis.

The callback was done in a situation in which the use of, or exposure to, a violative product may cause temporary or medically reversible adverse health consequences.

This had some impact on the company since its products directly impact the health of individuals.

#3 FII selling

FIIs have been divesting their stake in Aurobindo Pharma since March 2021. FIIs stake stood at 21.7% in the quarter ending September 2021.

It now stands at 21.4%. This stake sale by FIIs added insult to injury.

This was due to rising interest rates in the developed markets, making emerging markets like India less attractive for FIIs.

Apart from this, mutual funds have also decreased their stake by 3% YoY to 8.9% in September 2022.

For more details, have a look at Aurobindo Pharma's latest shareholding pattern.

#4 Poor quarterly results

Aurobindo Pharma, in September 2022 quarter, reported a 3.4% YoY decline in revenue at Rs 57 bn.

Due the decline in revenue, the company's net profit also fell 41.3% YoY to Rs 4.1 bn. The company's management said the quarterly performance was subdued, mainly due to macro-environmental factors and higher competitive intensity for some products in the US.

However, it is confident the robust pipeline of new products will provide impetus to the future growth trajectory.

How shares of Aurobindo Pharma have performed recently

Aurobindo Pharma's share price is down 34.5% in a year. So far, in 2022, the shares are trading lower by 37.2%.

In a month, the shares have eroded 15% of their market value.

The company touched its 52-week high of Rs 742 on 1 November 2022 and its 52-week low of Rs 455 on 24 November 2022.

It is currently trading just 1.1% away from its 52-week low.

Aurobindo Pharma is currently trading at a PE (Price to Earnings) multiple of 20.3 times and a price to book multiple of 1.6x.

About Aurobindo Pharma

Aurobindo Pharma is one of the top 5 manufacturers of semi synthetic penicillin in the world.

The company is into business of, developing, manufacturing, and marketing active pharmaceutical ingredients (APIs also referred as bulk actives) intermediates and generic formulations.

Its robust product portfolio is spread over 6 major product areas encompassing, with around 65 APIs in the non-antibiotics and over 55 APIs in the antibiotic segment.

It is running with 14 manufacturing plants across the world and an extremely well-equipped research and development (R&D) facility.

Aurobindo Pharma has identified international operations also catering to over 100 countries.

For more details about the company, you can have a look at Aurobindo Pharma factsheet and quarterly results on our website.

You can also compare Aurobindo Pharma with its peers.

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