Aurobindo Pharma aims to become debt free in three years sans Sandoz deal

Aurobindo Pharma expects to become a debt free company in the three next years barring the amount it is spending on acquisition of Sandoz products, a senior official of the company has said.

In September last year, the $3 billion drug maker said its US subsidiary entered into an agreement to acquire commercial operations and three manufacturing facilities in America from Sandoz Inc, USA, a Novartis Division, for $900 million.

“During the year, we will reduce between $150 million to $200 million debt, and we have already achieved that. On the long-term front, based on the experience, which we had in the last two or three quarters, and we are targetting to achieve a zero debt in the next three years. That’s what we are all seeing on the existing business… without considering Sandoz,” Santhanam Subramanian, Chief Financial Officer (CFO), Aurobindo Pharma, said in a recent earnings call.

The company’s net debt decreased by $71 million quarter-on-quarter to $522 million at the end of September 2019 against $593 million at the end of June 2019.

The majority of the company’s debt is denominated in foreign currency.

The cash and bank balance was at $305 million.

Replying to query, Narayanan Govindarajan, Managing Director, Aurobindo Pharma, said they expect Federal Trade Commission’s nod for the acquisition of the Sandoz products and three facilities by next month or January 2020.

The acquisition will add approximately 300 products including projects in development as well as commercial and manufacturing capabilities in the US, complementing and expanding the group’s portfolio and pipeline and the portfolio is expected to generate over $900 million in sales for the first 12 months after completion of the transaction for Aurobindo, the drug firm had earlier said.

Govindarajan said the company is expecting re-inspection of its three manufacturing facilities, of which one received warning letter and two others received “official action indicated (OAI)” from the US Food and Drug Administration (USFDA).

“The inspection should happen before March or by March-April time line is what our best estimate is. And, we are preparing ourselves to ensure that the inspection goes well,” the official said.