India’s fourth-largest drugmaker by sales Aurobindo Pharma
is gearing up for a massive push in Europe as it plans to be USD 1-billion company by sales in that continent in next three years.
Aurobindo — which has sales of around USD 500 million in Europe — is planning to double the revenues through a combination of buyouts and organic expansion.
Spelling out Aurobindo's Europe strategy, Chief Operating Officer and Head of Formulations Sanjeev Dani said: “We will be leveraging our product development as well as supply capability in terms of the cost.”
Our aim is to be in the top 5 generic companies in Europe, Dani said. Currently, Aurobindo is among the top 10 generic players in seven European countries namely Portugal, Netherlands, France, Germany, Belgium, Spain and Italy.
Aurobindo has shareholder approval to raise Rs 2,100 crore through a sale of shares, which it intends to use for global acquisitions. In addition, the company is spending about Rs 900 crore as part of its capital expansion — that includes an oral finished dosage facility for European markets in Visakhapatnam, Andhra Pradesh.
To be sure — Aurobindo isn’t limiting itself to acquisitions alone as growth driver — the company has charted an organic growth plan that includes preparing to launch 200 new generic drugs including high-margin injectables across Europe in the coming 18-24 months, and most of them are day-one launches based on patent expiration.
The drugmaker's 135-million euro acquisition
of Portugal-based Generis Farmaceutica from PE firm Magnum Capital Partners is in line with this strategy.
The deal helps Aurobindo to consolidate its footprint with 15 percent share in Portugal’s USD 600 million generics market. It also allows Aurobindo further market share gains and margin expansion by leveraging its active pharmaceutical ingredient (API) backend manufacturing and supply chain efficiencies.
In a recent statement, Aurobindo said it plans to use the underutilised facility of Generis in Portugal to service the Portuguese market efficiently and also to capture untapped business opportunities in other European countries by participating in short lead-time tenders and low volume products leading to improvement in capacity utilisation from current 50 percent to over 80 percent by 2020.
Aurobindo’s string of acquisitions in Europe started in 2006 with the buyout of UK-based Milpharm, followed by its second acquisition of Pharmacin in Netherlands the next year. The company continued its inorganic journey in Europe shopping product portfolios that were put up for sale.
Besides, in 2014, the Hyderabad-based pharma company was able to successfully turnaround money-losing Western European commercial operations of Irish drugmaker Actavis Plc, which it bought for 30 million euros.
With an economic slowdown and an aging population, many European countries have been trying to cut down healthcare expenditure costs and advocating the use of low-cost generic drugs over high-cost branded ones. This has opened up huge opportunities for Indian generic drugmakers to exploit. But at the same Europe also poses challenge given the fact the generic drugs are highly-commoditised with low margins.