aurobindo pharma acquisition

Group 2:

Rajamudi, Manjunatha, Manjunath & KaranMergers & AcquisitionIGTC-Bangalore, Feb 2012

Acquisition

Introduction Pharma industry Balance sheet evaluation Future plans Conclusion

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• Among largest pharmaceutical companies in India

• Product portfolio:– CVS, CNS, Anti-Retroviral, Antibiotics, Gastro-

enterologicals, Anti-Diabetics and Anti-Allergic – Approved manufacturing facilities by UK-

MHRA– R & D strengths lie in developing intellectual

property in non-infringing processes and resolving complex chemistry challenges

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• 1986: Founded in Pondicherry• 1988-89: commenced operations with a single

unit• 1992: Public venture• 1995: listing shares in various stock exchanges• Market leader in semi-synthetic penicillin drugs• Multi-product PF with multi-country

manufacturing facilities

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Rank Company Revenue Mar 2010 (in USD)

1 Cipla 1127.08

2 Ranbaxy Laboratory 993.29

3 Lupin Ltd 944.97

4 Dr Reddy’s Laboratories 923.47

5 Sun Pharma 813.32

6 Aurobindo Pharma 677.54

7 Piramal Health 416.73

8 Cadiala Health 318.85

9 Matrix Labs 310.06

10 Wockhart 309.68

Subsidiaries: UK, SouthAfrica, Bangkok, Turkey, Malta,

Canada, Nigeria, US, Italy, Denmark, France, Bulgaria, Germany, Ireland, Switzerland, Latvia, Japan, Hungary, Spain, Portugal, Australia, China, Netherlands, Brazil

Overseas operations: Ethiopia, Ghana, Vietnam, UK, HK, Russia

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Market leader in SSPs, cephalosporins,… Global scale manufacturing using cost-

effective markets APL RC: 13,000m2 and 700 scientists Focus: organic synthesis, analytical

research dosage form development, pharmacology, bio-equivalance studies and drug delivery systems

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World pharmaceutical market in 2012 was projected to grow 5 - 7%

India is the 3rd largest producer of Pharmaceuticals in terms of volume- is $ 8.2billion Pharma market

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The company’s robust product portfolio is spread over 6 major product areas (encompassing Antibiotics, Anti-Retro Viral, CVS, CNS, Gastroenterological, and Anti-Allergic) with around 65 APIs (Active Pharma ingredient) in the non-antibiotics and over 55 APIs in the antibiotic segment.

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•Product portfolio over 90 drugs• Revenues generated : Domestic: 47% Exports: 53%• Share of exports to shoot to 70%•Board-10 ppl.

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Financial data

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Export Breakup

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Major shareholder break up

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•Focusing on US and Europe markets and planning for 4-5 acquisitions each in the range of EUR 15-40 mn. The Company will get wide marketing presence.

•Aurobindo-Sri Chakra Remedies merger swap at 3:100

• JV with Salus Pharmaceuticals.(R & D Alliance)

• Aurobindo arm acquires Dutch firm Pharmacin.

• Capitalising on Patent Expiries• Strengthening Marketing Infrastructure • Strong Customer Base

Indian Promoters 54.36 Banks Fin. Inst. and Insurance 4.99 FII's 19.21 Private Corporate Bodies 4.01 NRI's 0.66 General public 16.7

Reported EPS 

 20.40  94.34  23.91 54.08 42.94

Operating Margi

 23.42  23.28  18.49 14.20  14.85

Reported Return On Net Worth

 23.10 27.46 23.5 23.82  24.65

Total Debt/Equity

 0.90 1.02  1.60  1.44 2.13

Current Ratio

 3.53 3.55  4.19  4.21 5.17

Quick Ratio 2.22  2.28 2.99 2.97 3.86

Wide range of Product portfolio of over 250 finished dosage

Product portfolio in life-style disease, anti-AIDS, anti-infectives and pain management with pediatric products and technologies

Aurobindo's R & D strengths lie in developing intellectual property in non-infringing processes and resolving complex chemistry challenges.

Strong R&D has over 700 research scientists

During the period from 2006-2011.Arbindo had grown over 200% in terms of sales turnover

DAWN RAID : Not possible since promoter has major stake of 54%

SATURDAY NIGHT SPECIAL : Not possible as stringent rules by SEBI

PROXY FIGHT : Not possible b’cz promoter have majority stake Very less chance only if there is friction b/w the

promoter

BEAR HUG : Cipla is making offer to Aurobindo

Aurobindo net profit worth Rs.2569 cr ( march 2011 )

Based on valuation cipla will make 30% premium offer to promoter group & existing public share holders

Cipla has reserves of Rs.6400 cr so they can easily acquire

Possible chances of financial gap developing from the estimated cost of acquisition due to

Other pharma companies trying to acquire Aurobindo

Extra expenses such as professional advisor fees cost of taking away internal resources to acquire

Alternative option of joint venture could be cost effective

Crown jewel tactic People pill Just say ”No”

Since majority of Cipla’s retained earnings are in cash form, we are suggesting all cash deal for Aurobindo Pharma share holders

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Due to corporate governance issues we suggest Aurobindo Pharma follow good corporate governance practices

In US one of there drugs was banned so we suggest stronger and more stringent quality checks

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