Orchid Chem to make drugs in 3 new segments

Orchid Chemicals and Pharmaceuticals Ltd is planning to enter into manufacturing of formulation drugs in three new therapeutic segments in the current fiscal. The company would invest around Rs 200 crore to support the new business.

Meanwhile, company's promoters are planning to revoke half of its pledged shares in the next two to threequarters.

Speaking to reporters on the sidelines of the company's AGM, K Raghavendra Rao, chairman and managing director, Orchid Chemicals and Pharmaceuticals, said, "The proposed investment is to support the company's foray into therapeutic segments in which manufacturing process is difficult and has less competition.”

The current fiscal's investment of Rs 200 crore will be on setting up of a facility to manufacture the new products. However, Rao refused to divulge more information on the plans.

The company promoters are planning to revoke half of its pledged shares in the next two to three quarters. The promoter and the promoters group holds 30.53 per cent share in the company, of which around 70 per cent are pledged. This had created apprehension among the shareholders about the stability of the company.

“We expect to bring this down to half in next two quarters,” said Rao. The company has received its shareholders' approval to raise long-term funds up to Rs 1,000 crore from domestic or overseas capital markets for redemption of outstanding foreign currency convertible bonds (FCCB) and other business purposes.

The company has an outstanding FCCB at a face value of $117.42 million (around Rs 785 crore) due in February, 2012. It would decide on the mode and quantum of raising funds by February, Rao said.

Orchid is also planning to increase its brand presence in the domestic market, with new products. It had posted a Rs 110 crore revenue from the domestic market last fiscal and expects to increase it to Rs 170 crore this year. It is also expecting the cephalosporin active pharmaceutical ingredient (API) business to Hospira to grow in future.

Last fiscal, around 21 per cent of the total revenue of the company was from supply to Hospira. It is to be noted that the company, in 2009, sold its injectables business to Hospira for an amount of $400 million.

The company recorded $25 million (around Rs 110 crore) revenue through direct sales in US through the recently acquired Karalex Pharma. The company announced acquisition of the US-based generics marketing company in February, 2010. It is planning to increase the revenue through direct sales to US by 20-25 per cent each year.

Rao also said the company expects an overall growth of 20-25 per cent of business for the company in the current fiscal.

However, it posted a 28 per cent fall in net profit on a standalone basis for the first quarter of current fiscal. For the three months ended June 30, 2011, it posted a net profit of Rs 15.54 crore as against Rs 21.61 crore in the same period of previous fiscal.

The total operating income increased 16 per cent to Rs 383.59 crore during the first three months of the current fiscal from Rs 330.93 crore.

The company is into manufacturing and marketing of finished dosage and active pharmaceutical ingredient (API) cephalosporin and injectables APIs for penicillins, carbapenems and oral APIs and finished dosage of non-penicillin and non-cephalosporin drugs.