US-based generic injectable medicine manufacturer Hospira has acquired Orchid Pharma’s facility in Aurangabad, along with the related research and development (R&D) facility in Chennai, for $200 million. C Bhaktavatsala Rao, managing director, Hospira Healthcare India, in an interview with Gireesh Babu, shares the synergy of the acquisition. Edited excerpts:
How important is the acquisition of Orchid’s facility for Hospira?
Earlier, Hospira had an antibiotic franchise. With the acquisition of Orchid’s facility in 2010, we raised our stake in that important portfolio. Our Indian entity has operations in three segments — cephalosporins, penicillins and carbapenems. We have been improving our performance substantially in these segments over the last two years.
Injectables are life-saving medicines, and we are into this segment. As far as turnover is concerned, these are consolidated globally. But there are three or four things we have to look at. We have been sourcing the active ingredients for penicillins and carbapenems from Orchid, while the finished formulations were manufactured at our Irungattukottai plant in Chennai. We have the highest market share in the segment; we have to look at patient care. For this, the Aurangabad facility plays a vital role in production and is a strategic fit for us. Through the acquisition, we would ensure the continuity of supply. We would also be able to reduce the cost and improve the efficiency of production. We expect this to help us in global expansion. The acquisition would also provide us an active pharmaceutical ingredient (API) platform for the future.
In the announcement, Hospira stated the acquisition would help the company improve its security of supply.
The Aurangabad plant is a state-of-the-art manufacturing facility, with first-class technology and excellent quality and compliance standards. The R&D facility in Chennai, which comes along with the current acquisition, would help us improve cost competitiveness, especially in the carbapenem and penicillin product groups, which account for 80-85 per cent of our export turnover. The Aurangabad plant is, therefore, a strategic site for us. Hospira has to ensure continuous supply of raw materials. We have to look at options to ensure the supplies of products for which we have the sole supply source. This would help avoid any shortage in the supply of raw materials, something that could affect production.
Besides, Hospira is currently oriented towards dosage formulations, except for a small API manufacturing facility at Boulder. This would, in a way, support our selective backward integration towards active drug production.
Do you think there is synergy between Hospira’s requirements and Orchid’s operations?
Technology barriers are high in the injectables segment, in which Orchid is present in terms of sterile APIs; the capabilities required in this segment are high. Regulatory requirements for our markets are also high, and Orchid, with its high quality APIs, has developed good capability for the segment.
You have also tied up with Zydus Cadila.
The joint venture with Cadila was a tie-up between Mayne Pharma and Zydus Cadila in 2005. When Hospira acquired Mayne Pharma in 2007, the joint venture also came to Hospira. It is a facility for manufacturing a range of oncology formulations for Hospira. The joint venture is doing well.
Do you see more tie-ups or acquisitions in India?
It may not be right to comment on such joint ventures or acquisitions. With the expansion in the recent past, we are at a stage where further expansion could be thought of only after consolidation. Now, our focus would be consolidating our operations in the country.
What about the development plans for Visakhapatnam?
The Vizag facility in Andhra Pradesh is coming up well. We are installing various equipment and the plant is expected to start operations according to schedule.
Do you have any plan to sell your products in India?
Currently, our goal is to meet global demand. We have not thought of a plan to sell products in India as of now, though we recognise the importance of the fast-growing Indian market. We would focus on consolidating our operations in the antibiotics and other segments through our facilities and serve global markets.
