India's Aurobindo to build up sterile injectables operations

Mylan's decision this year to pay $1.6 billion for Strides Arcolab's injectables unit Agila Specialties left competitors wondering what the upside potential of their own injectables operations might be. India's Aurobindo Pharma is the latest to take steps to find out.

The company is moving its sterile injectables business into a new subsidiary, The Economic Times reports, and has asked a committee of independent directors to explore "strategic alliances and acquisitions." The directors are supposed to report back in 60 days. The company's spokesperson told The Economic Times that Aurobindo expects this part of its business to contribute a growing percentage of its revenues, but the plan to unlock its potential is at an early stage.

Sterile injectables is a growing market, and Aurobindo is not the first company to want to get a handle on the potential of their sterile injectables operations. Shortly after the Mylan ($MYL) deal was announced in February, Jordan-based Hikma said it had gotten some unsolicited interest in its sterile injectables business and so decided to see what it might bring if it were to sell it. A few months later, the company said it had done the math and decided it was worth more to keep the growing business.

Other companies see the potential in the market as well. Teva Pharmaceutical Industries ($TEVA) has expanded it injectables capacity at a plant in Hungary. Hospira ($HSP) has upgraded plants in the U.S. to address quality problems but also has bought a modern API plant in India to feed its operations. Some new players also have decided it is worth the significant upfront investment to get into the market. The medical technology company Becton Dickinson ($BDX) in March started manufacturing its first FDA-approved sterile injectable product at a plant in North Carolina but said it would roll out 20 to 30 more drugs over the next several years. Its angle is to charge a premium by selling them in the company's pre-filled syringe products, which it says are safer and save time.

Aurobindo Pharma currently manufactures injectables at two of its manufacturing facilities located near Hyderabad. Aurobindo expects to expand capacity at its newest facility over the next 18 months to two years. According to The Economic Times, Aurobindo Managing Director N. Govindarajan told reporters at the company's annual meeting last week that the company would add capacity to a new unit that started production on specialty injectables in March. He said the unit is currently approved by the FDA to make four products and is producing about $2.5 million to $3 million worth of sterile injectables a month. It has applications for 31 more drugs. Govindarajan said he expected the facility to be producing $8 million to $10 million worth of product per month in the next 6 to 8 quarters.

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