It is too premature to take a call on Aurobindo Pharma: Kunal Dhamesha, SBICAP Securities
The injectables plant is important from their future growth as well as current revenue perspective.
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The US FDA has made serious observations on Aurobindo Pharma. How significant could these be for the counter? What kind of implications will this have?
The number of observations looks very high, specially for the injectable plant because US FDA scrutiny is at a different level for injectables than it is for oral solids plant. The way I look at is that a number of observations should not matter much. It should be the nature of the observation that should matter.
The stock reaction in my view is disproportionate as of now, given that we do not know the nature of observations but this plant was inspected in December 2018 and at that time they got only two observations. This plant is important from their future growth perspective as well as current revenue perspective. It is too premature a call to take before we know the nature of those observations.
Do you revise your price estimates lower for Aurobindo Pharma?
As of now, before the nature of observation is known, I would not do anything like that. Once the nature of observation is known, then I will compare it with what are the observations which are frequently cited in the OAI or warning letter. If that matches, then I would probably put a probability that the chances OAI or warning letter is high and I might think of lowering the price target.