Pfizer slashes offtake from Aurobindo

Increased scrutiny by the US Food and Drug Administration (FDA) may be taking the sheen off Aurobindo Pharma’s deal with US pharmaceuticals giant Pfizer.

According to sources familiar with the development, Pfizer, which is treading carefully, has gone slow on picking up products manufactured at the Aurobindo plant that are subsequently shipped to emerging markets.

The shift in stand has started translating into revenue shrinkage, one source said.

Pfizer had entered into an agreement with Aurobindo to leverage the Hyderabad-based company’s expertise in churning out products in high volumes to cater to the demand in emerging markets. “There were expectations that Pfizer would take Aurobindo’s products to about 70 countries and launch some 800 products. However, the plan now stands ramped down significantly,” a source tracking the matter said.

The pain shows. Pfizer would now tap 27 countries and launch nearly 180 products over the next 12 months, which in turn is expected to have a significant bearing on the volumes of Aurobindo, in addition to its revenues.

The impact on revenues was already visible in the third quarter of this fiscal, with Pfizer contributing about `67 crore as against `86 crore in the same period of the previous fiscal. “There is certainly some slowdown though it can’t be said to be at alarming levels. However, it is improving and in the financial year, it should improve further,” a company spokesman told DNA Money.

But some say the move on the part of Pfizer may have more to do with the overall business strategy tweak rather than anything specific to Aurobindo.

"Pfizer has withdrawn from some countries, including the Nordic region. The slowdown in traction with Aurobindo is due to the change of strategy at Pfizer,” the source explained.

Despite the slowdown in offtake by Pfizer, some Aurobindo insiders see a positive side to it. They maintained that even if Pfizer had offered to sell Aurobindo-manufactured products in about 70 countries, the volumes have never fetched the expected margins.

“Even if the original plan was implemented, there would have been a good topline, but margins were suffering. Now, Pfizer has redrawn the whole plan to focus on relatively big countries. This plan would now offer both volumes and margins. Even for Aurobindo, to supply products in small shipments was causing complications in packing,” another source said.

In fact, the source let out, the management of Aurobindo was very much in the loop about Pfizer’s shift and the scale-down in volumes was agreed upon mutually.