Aurobindo bids for Novartis’ unit

After Torrent Pharmaceuticals dropped the idea to acquire Sanofi’s European generic business last month, Aurobindo Pharma has entered the race to buy the dermatology generics drug business of Novartis for $1.6 billion. If it goes through, this will be the biggest overseas acquisition by an Indian drug major since Lupin’s acquisition of Gavis Pharma and Novel Laboratories for $880 million in 2015.

Reports suggest Aurobindo has submitted an initial bid to buy the Swiss drug major’s assets that include dermatology brands, production facilities and other infrastructure (primarily in the US). India Infoline said: “Novartis was expecting $1-1.5 billion for this business and it looks like Aurobindo’s bid is aggressively placed.”

An email sent to Aurobindo remained unanswered. Sale of the dermatology generics business (under the Sandoz brand) is part of Novartis’ plan to exit some of its less-profitable businesses. Sandoz was hurt by pricing pressure in the US; it discontinued some of its drugs and also shut down its Colorado plant.

Analysts feel that Aurobindo has placed an aggressive bid for low margin assets. IIFL said, “Aurobindo has operating margins more than 23 per cent. We believe that Sandoz’s dermatology business could have margins less than 16 per cent, and hence, the deal would be margin dilutive. It also seems that Aurobindo has placed an aggressive bid for the low margin assets.” US is the most important market for Aurobindo, it draws almost 57 per cent of its formulations revenue from the geography.