Aurobindo plans second U.S. plant as Trump calls for local production

MUMBAI (Reuters) - Indian drugmaker Aurobindo Pharma ARBN.NS plans to set up a factory in the United States for injectable products, it said on Friday, days after U.S. President Donald Trump called on pharmaceutical companies to make more drugs locally.

Trump urged U.S. drug industry executives at a meeting last month to increase local manufacturing and to bring down medicine prices. He has also proposed to impose a penalty in the form of a “border tax” on U.S. imports, a move criticized by several import-dependant industries.

His comments have worried some in India’s roughly $15 billion pharmaceutical industry which supplies about 30 percent of the medicines sold in the United States and relies on the country for the bulk of its export revenue.

“With the current landscape of what’s happening with the U.S. White House administration, and some of the things that may change there, clearly, we don’t think having capacity in the U.S. would be detrimental at this point,” Aurobindo’s U.S. chief, Bob Cunard, told an earnings briefing.

Aurobindo, India’s fourth biggest drugmaker by sales, makes more than half its revenue in the United States selling everything from HIV/AIDS medicines to anti-bacterials to schizophrenia drugs. It makes tablets in New Jersey but much of its U.S. supply still comes from its six factories in India.

Cunard said the company was planning to put the injectable drugs factory at its New Jersey site.

Aurobindo also reported lower than expected profit in the final quarter of 2016 on Friday as it was hurt by price erosion in the United States.


Trump is also looking to repeal the Affordable Care Act, a move that would leave some Americans without insurance and make them more reliant on cheap generics, said D.G. Shah, secretary general of the Indian Pharmaceutical Association that represents 20 large generic drugmakers.

While not all Indian drug makers are looking to boost their U.S. manufacturing presence just yet, most are watching closely for any policy changes.

"We are extremely vigilant," said Nilesh Gupta, managing director of India's third biggest drugmaker Lupin LUPN.NS, which made its biggest U.S. investment in 2015 through a $880 million deal to buy generic drug assets there. In an interview on Thursday, Gupta said Lupin had no plans to scale up its U.S. manufacturing but cautioned: "If there is ever a border tax or something, then obviously, we will need to revisit the whole situation." Lupin's CEO, Vinita Gupta, said the cost of such a tax would have to be passed on to patients and the U.S. healthcare system, meaning this would go against Trump's goal to lower drug prices.

Rival Cipla CIPL.NS, which made a $550 million acquisition in the United states last year in its biggest boost to business there, said it did not plan on changing its strategy just yet.

“We will watch the evolving regulatory aspects in the U.S., but it’s unlikely that generics will get impacted,” said Kedar Upadhye, Cipla’s chief financial officer.

Editing by Euan Rocha and David Clarke