Citi -- Orchid Chemicals : Expanding Into Regulated Markets

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Expanding Into Regulated Markets
 Business Snapshot – Orchid Chemicals & Pharmaceuticals Ltd was
established in 1992 as a 100% Export Oriented Unit (EOU). Commencing
operations in 1994, Orchid has emerged among the Top-15 companies in
the Indian pharmaceutical industry in a short span of fifteen years of
operations. Orchid employs over 4,000 people, of which over 700 are
scientists, technologists and other professionals. A robust leadership
position in the antibiotics space, a core competence in oral and sterile
manufacturing, a broad-based multi-therapeutic coverage and an end-toend
connectivity over the pharmaceutical value chain, from discovery to
delivery, have positioned Orchid uniquely.


 Latest Quarterly Performance – Orchid net sales were up 20.8% YoY, driven
by supplies to Hospira and commencement of Meropenem API supply to
other partners. EBITDA Margins stood at 17.5% (down 840 bps YoY, down
110 bps QoQ) due to higher raw material expenses and SGA expenses.
Higher other income and lower interest costs buoyed net profit (Q2 FY10:
loss of Rs 130 mn).

 Key Catalysts / Issues – a) Market share in key products in the US and EU
markets – viz. Tazo-Pip, Meropenem, Imipenem; b) Scale up in API supplies
to Hospira; c) New launches in the NPNC (non penicillin, non
cephalosporin) space; d) Ability to maintain a healthy balance sheet, given
the potential need to redeem its FCCBs in CY11 (check this last part and
add amount if available)
 Valuations – The stock trades at 19xMar 12 FDEPS Bloomberg consensus
estimates