Orchid plans entry in therapeutic biz

Company expects these high-margin, low-volume verticals to involve low capex and have limited global competition due to complex chemistry and stringent manufacturing pracftices

Chennai-based Orchid Chemicals and Pharmaceuticals Ltd is planning to foray into new high-margin, low volume therapeutic verticals which would also require low capex.

The company expects these verticals, by nature of the complex chemistry and stringent manufacturing process requirements,  to have limited global competition.

This would provide a robust revenue and market base in the future, said K Raghavendra Rao, chairman and managing director of Orchid Chemicals and Pharmaceuticals Ltd.

In his address to the shareholders ib the annual general meeting, he said, "The success and strong base that your company built in the global antibiotic arena will be replicated in these vertcals."

It is to be noted that the company has recently announced sales of its penicillin and carbapenem active pharmaceutical ingredients (API) business, a manufacturing facility in Aurangabad, Maharashtra along with associated R&D infrastructure and product portfolio to Hospira India, a subsidiary of US-based Hospira Inc for a consideration of $200 million.

After this, the focus of the company would be on consolidating its existing business verticals and optimising the product-mix in high value markets.

The current product portfolio togather with the product basket under development, spread across cephalosporins and non-antibiotics would add impetus to the performance of the company going forward. "These initiatives will help the company to bridge the revenue drop on account of the business transfer to Hospira," he said.

The company, which has been facing debt burden along with rising interest rates, which  lead to huge interest outflow. The proceeds of sales to Hospira would be utilised for de-leveraging Orchid's debt position and also expected to facilitate its foray into newer product verticals, said Rao.

It is to be noted that the company, in 2010, completed sales of its generic injectables business to Hospira for $400 million.

The company has a total debt of around Rs 2,200 crore, and of the $200 million (around Rs 1100 crore) which would come from the new divestment, around Rs 800 crore would be to reduce the debt, said company officials recently.