Share prices of the two drug majors touch 52-week high on BSE
Share prices of leading domestic drug companies, Lupin and Orchid Chemicals and Pharmaceuticals (Orchid) touched their 52-week high on Friday, owing to speculation that Lupin wanted to buy-out the Chennai-based Orchid.
During the week, Lupin’s shares rose 3.92 per cent, while Orchid went up 4.6 per cent on the Bombay Stock Exchange (BSE). While the shares of Lupin rose to a 52-week high of 448 on Friday, those of Orchid jumped 4.43 per cent to a 52-week high of Rs 326.60.
When contacted, both Lupin and Orchid denied any merger plan. “We have a policy not to comment on baseless market speculations,” said a Lupin spokesperson.
Solrex Pharmaceutical, a Ranbaxy Laboratories company, had bought close to 15 per cent in Orchid about two years ago. It sold that stake recently. At that time, there was speculation that Ranbaxy was looking at acquiring the company. Takeover laws in the country require an acquirer to make an open offer for another 20 per cent shares once its stake crosses 15 per cent.
Orchid is one of the top-five producers of cephalosporin, as well as difficult-to-make carbopenams and oral antibiotics in the country. It also has a facility in China—owned by its joint venture company—to produce cephalosporin.
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Lupin claims to be the world’s largest integrated manufacturer of cephalosporin and has many established drug brands in this category, both in the domestic and overseas markets.
In December last year, Orchid had divested its injectible drug business to US-based drug major Hospira for $400 million (Rs 1,800 crore at the current exchange rate). With this money, Orchid repaid its debt worth Rs 1,400 crore, which brought its debt to equity ratio to a healthy 1.3:1 from the earlier 4.6:1. Still, Orchid has debt of over Rs 1,250 crore on its books, including foreign currency convertible bonds (FCCB) worth Rs 550 crore which will in February 2012.
Lupin is planning to invest an average $100 million (Rs 450 crore) an year to expand its production capacity and acquire companies abroad, Lupin President (finance and planning) Ramesh Swaminathan said in a recent interview. The company is also looking at acquisitions in South America, Western Europe (Italy and Portugal), Russia and South Korea.
Lupin is among the top five generic drug companies in United States and among the top ten companies operating in the domestic drug market. In the last two years, the company has acquired seven small companies in various geographies to create front-ends for marketing.