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Orchid Chemcials & Pharmaceuticals
(ORCD.BO)
Analyzed Non-Rated Snapshot
Takeaways from Mumbai — Orchid Chemicals & Pharmaceuticals presented at our
India Min-Conference in Mumbai. Below are key takeaways.
Growth outlook — Orchid expressed confidence on achieving revenue growth of
40% (on the base adjusted for business sale to Hospira) & faster growth in net
income in FY11 - despite subdued numbers in 1HFY11. It also expects
momentum to sustain over the longer term, driven by its deal with Hospira, and
key product opportunities such as penems and Tazo-Pip.
US: a key growth driver — Orchid's US pipeline has 38 ANDA filings (of which 21
have been approved) including 8 FTFs (addressable market: US$8bn). It is also
developing more products, with a cumulative market size of US$75bn. Most of the
FTFs would play out over the FY13-14 time frame. Generic Zosyn (Tazo Pip) is one
of its key products in the US, with its partner (Hospira) having a 40% market
share in the US.
Penems: A key opportunity — Orchid is targeting the penems opportunity in
Europe and US - Meropenem and Imipenem being the key near-term
opportunities. Combined sales in these markets stand at cUS$1bn, and this is
likely to be a limited competition space. Orchid's partner (Hospira) has already
launched Meropenem in the US. Orchid believes it is the only supplier, expects
high margins (>40%) and does not expect competition for the next 12-18 months.
Imipenem launch can also happen in the next 3-6 months.
Balance sheet — Orchid currently has a Debt Equity ratio of 1.2x and is
comfortable with keeping this around the 0.7x range. It expects to reach this mark
over the next three quarters. The company also does not expect to incur any
significant capex over the next 2 years and intends to focus on improving
utilisation going forward.
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