Biosimilars Expansion And EU Approvals Will Unlock Global Markets

Key Takeaways

• Expansion into biosimilars, specialty products, and US acquisitions is strengthening Aurobindo's portfolio, market access, and earnings potential.
  
• Increased manufacturing capacity, in-house production, and investment in complex generics support margin expansion, efficiency, and long-term growth.
  
• Heavy reliance on the U.S. market, regulatory risks, pricing pressure, and slow progress in new drug segments threaten long-term margins and revenue diversification.

Catalysts

A biopharmaceutical company, engages in the manufacture of generic formulations and active pharmaceutical ingredients in India, the United States of America, Europe, Puerto Rico, and internationally.

• Expansion into biosimilars and specialty products is accelerating, with recent EU approvals and commercial launches in Europe expected from Q3/Q4 onward, positioning Aurobindo to tap high-value markets and benefit from expanding global acceptance of biosimilars-supporting future revenue growth and potentially higher gross margins.
  
• Demographic tailwinds (aging global population and increased healthcare spending) combined with governments' continuing push for lower-cost generic drugs are expanding Aurobindo's addressable market in Europe and emerging markets, as evidenced by sustained double-digit growth in these regions-expected to drive both top-line growth and market share over the long term.
  
• Ongoing ramp-up of new manufacturing capacity (PenG, China, US, and Vizag facilities) and increasing in-house production is improving operational efficiency and backward integration, supporting cost control and expected margin expansion in coming quarters-positively impacting net margins and operating profit.
  
• Strategic US acquisitions (such as Lannett) provide access to niche, in-demand products (e.g., controlled substances, ADHD meds), new distribution channels, and underutilized manufacturing capacity, enabling portfolio expansion and vertical integration that should contribute to future revenue diversification and higher earnings.
  
• Continued investment in complex generics, R&D, and digital automation (with a robust ANDA filing and approval pipeline) positions Aurobindo for sustained new product launches and faster market entries, underpinned by secular industry trends toward digitalization and specialty generics, likely bolstering both revenue and long-term earnings growth.

Aurobindo Pharma Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Aurobindo Pharma's revenue will grow by 8.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 10.6% today to 12.6% in 3 years time.
• Analysts expect earnings to reach ₹50.8 billion (and earnings per share of ₹79.68) by about August 2028, up from ₹33.9 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as ₹43.0 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.6x on those 2028 earnings, up from 18.5x today. This future PE is lower than the current PE for the IN Pharmaceuticals industry at 31.2x.
• Analysts expect the number of shares outstanding to decline by 0.86% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.73%, as per the Simply Wall St company report.

Aurobindo Pharma Future Earnings Per Share Growth

Risks

• Aurobindo Pharma faces persistent pricing pressure and double-digit declines in its API segment due to both aggressive domestic competition and import dynamics, which, if sustained by global oversupply or new competitors, could pressure revenue and gross margins over the long term.
  
• The company's significant reliance on the U.S. market exposes it to concentration risk, particularly as U.S. buyers and government initiatives increase their push for domestic manufacturing and potential protectionist measures (including tariffs), which could reduce export growth and compress U.S. profits.
  
• There is potential for regulatory or compliance setbacks, including pending U.S. FDA reinspections, historical warning letters, and the risk of plant-level disruptions or delayed approvals-especially for key new facilities in the U.S. and China-which could lead to elevated remediation costs and negatively affect operating margins and future earnings.
  
• While Aurobindo is making strategic investments in biosimilars and specialty drugs, initial revenue traction in these new segments is slow and subject to substantial price erosion and margin uncertainty in highly competitive, tender-driven European markets-thus posing a risk to future profitability and sustainable revenue diversification.
  
• Exposure to global supply chain disruptions (including rising raw material/API costs, geopolitical tensions, and environmental regulations), as well as ongoing price controls in export markets, could erode net margins and undermine operational efficiency over the long term.

Valuation

• The analysts have a consensus price target of ₹1293.393 for Aurobindo Pharma based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹1930.0, and the most bearish reporting a price target of just ₹730.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹402.9 billion, earnings will come to ₹50.8 billion, and it would be trading on a PE ratio of 20.6x, assuming you use a discount rate of 12.7%.
• Given the current share price of ₹1078.2, the analyst price target of ₹1293.39 is 16.6% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.