Home >Companies >Company Results >Aurobindo to go big on API manufacturing

NEWS DELHI : After scaling up manufacturing of high-margin finished formulations significantly, Aurobindo Pharma is looking to shift its focus back to its roots of manufacturing bulk drugs, especially fermentation-based active pharmaceutical ingredients (APIs), for which Indian drugmakers are almost entirely dependent on China.

“The capacity creation we have done on formulation is enough for us for the foreseeable future. Now, we are shifting focus in terms of regular capex flow more into the API," N. Govindarajan, managing director, Aurobindo Pharma, said on Thursday.

The Hyderabad-based firm plans to invest 3,000 crore over 30-32 months, and will manufacture four more fermentation-based bulk drugs that are not currently made in India. Covid-19 and, to a certain extent, the border tension with China disrupted the supply of bulk drugs in February-March 2020. The Centre then came up with its 6,940 crore production-linked incentive scheme for over 40 bulk drugs.

Last month, Aurobindo was selected to set up plants for making three of the four bulk drugs, including penicillin G, 7-ACA and erythromycin thiocyanate. It is expected to get a lion’s share of the nearly 3,600 crore incentives earmarked for the four drugs over the next six years.

The company also plans to double external sales of APIs in four-five years, as per its investor presentation.

In October-December, $206 million ( 1,495 crore) of its consolidated revenue of 6,365 crore were from APIs, including APIs used to make its own formulations. External sales of APIs were just at 682 crore.

The rest was from formulations, with the US market generating over half of its sales.

“For the past around two years, we have been supplying more quantity for our internal consumption, and we have not been aggressively positioning or promoting ourselves as a manufacturer for our external customers. One of the reasons is, obviously, because of the lack of capacity. So, we will be expanding our existing capacities, including creating some large volume blocks to cater to our customers externally," Govindarajan added.

In the past year, the government and pharmaceutical companies have shifted focus on the supply of bulk drugs, for which India is extremely dependent on China.

Four of these fermentation-based bulk drugs were not made in India, and the government offered about half of the incentives to promote local manufacturing.

Analysts have been upbeat about Aurobindo’s strategy on APIs, with Elara Capital calling it a key growth engine, along with segments such as biologics, vaccines and injectables. Aurobindo is also foraying into vaccine manufacturing, and is setting up facilities to make viral and bacterial vaccines and expects revenues from the segment within 18 months.

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