Orchid to double tie-ups in Europe, US

Orchid Chemicals and Pharmaceuticals aims to double the number of drugs for which it has a marketing tie-up for the European and North American markets to 70 in the next two years.

Currently, the company has tie ups for 36 drugs, of which one is for the veterinary market.

K Raghavendra Rao, Orchid's managing director, expects the marketing tie-ups to eventually lead to revenues of about Rs 1,300 crore "" almost twice the company's current sales of Rs 689 crore "" from these markets.

The North American and European markets are lucrative because they have low entry barriers and modest realisations.

Cefazolin (an antibiotic), the first of the products where a tie up is in place, was recently cleared by the US Food and Drug Administration (FDA) for sale there. Apotex, which is to distribute Cefazolin, has a deal to sell seven more of Orchid's antibiotics there.

Rao said Orchid expects to launch five more products in the US this fiscal. The company has filed 18 Abbreviated New Drug Applications (ANDAs) with the US FDA, and has been inspected for nine of them.

Orchid retains the intellectual property generated out of novel processes used to make its drugs for generic markets. And out of the 20 non-antibiotic drugs where it has concluded a marketing tie-up, the company is to receive milestone payments of $25 million over a two-year period.

Orchid aims to remain an integrated supplier to the generic markets "" it would make both the bulk drug and formulation.

Its bulk drug complex in Aurangabad would be used to source non-antibiotic bulk drugs, while its first bulk drug complex outside Chennai would be used for antibiotics. All the formulations would be made at a plant in Irungattukottai, near Chennai.

The investment to create infrastructure to service North American and European markets has left the company with significant debt on its books. The company's interest charge in 2004-05 was Rs 72.31 crore, a little over 10 per cent of its sales revenue of Rs 689 crore.

Rao said the company's plans did not require additional capital expenditure now. However, Orchid has to either wait for its investments to pay off or issue equity to get rid of some of its debt.

"If a discerning investor is willing to put money (equity) and offers a decent valuation, we are open to it," he said. He added that Orchid does not have a specific proposal from any investor currently.