Capitaline

Analyst Meet / AGM 30-Sep-09

AGM

Orchid Chemicals

Received US FDA approval for Piperacillin – Tazobactam with 180 day generic drug exclusivity

Orchid Chemicals and Pharmaceuticals held its 17^th Annual General Meeting in Chennai on 30^th September, 2009. The meeting was presided by Managing Director Raghavendra Rao.
Highlights from the Meet:

The company received US FDA approval for Piperacillin – Tazobactam injections in Sept '09. It was also granted 180 day generic drug exclusivity for being the first applicant for the product. It is the company's first generic product with exclusivity. The company had received earlier approval for the same product from EU, ANZ and Canadian regulatory authorities.
The revenue growth over three years i.e. FY10 to FY 12 would be driven by penicillin segment in FY 10, carbapenems segment in FY 11 and non antibiotics segment in FY 12.
It plans to utilize the free cash flow of next few years towards reducing debts. For the same purpose, it has already purchased and extinguished USD 37.8 million aggregate face value of 2012 Bonds and USD 2.25 million aggregate face value of 2010 Bonds reducing debt and risk of erosion in profitability due to currency fluctuation.
With regard to Orchid Pharma Japan, it has 3 DMF applications with more in pipeline in coming quarters. Also it has identified initial basket of seven generic dosage form products for Japan filings and would pursue these products for development aggressively. Orchid Pharma Japan is expected to contribute to company's revenue basket from beginning of 2011.
The company is introducing its unique capabilities of end-to-end connectivity from API to dosage forms, from discovery to delivery, from development to marketing across diverse and complex therapeutic segments to select innovator companies.
It has no capex plan for FY 10.
US and EU account for over 80% of generic business. The generic business in US grew notably due to increased demand for its oral cephalosporin products which complemented its business of core injectable products. Also the generic business in EU made progress on despatches of key cephalosporin products based on additional approvals secured by partners. Also increasing demand and growing market share of Tazobactam Piperacillin is adding business volume and profitability.
The company had received US FDA approvals for its ANDAs for key non penicillin, non –cephalosporin products which is expected to grow a new stream of generic business in coming quarters. They include Zaleplon capsules, Sumatriptan tablets, Amlodipine Besylate tablets and Levetiracetam tablets.
The company has completed its all capacity enhancing and therapeutic segment diversification projects in line with their asset driven growth strategy and expect larger share of their asset base to contribute to business growth and profitability.
In June 09 quarter, it reported standalone total income of Rs 308.83 crore, up by flat 1% y-o-y. It registered net loss of Rs 29.76 crore in June 09 quarter from net loss of Rs 31.65 crore in June 08 quarter.
In the emerging market such as Russia, Africa etc, the company sets up its own front end sales. On the other hand, in regulated markets, it partners with other companies and supplies its products to partners.

Various therapeutic verticals that would contribute to growth in revenue and profits

Cephalosporins Segment: There would be continued volume ramp –up in business. Also it would introduce a few value added generics in this space leading to new phase of growth in cephalosporins from 2011 onwards.
Penicillin Segment: This segment began contributing to company's revenue with launch of Tazobactam Piperacillin injections in Australia, Europe and Canada towards end of 2008-09. It faces limited competition in this space in Europe and Canada. In Australia, it was first generic company to launch this product. Its recent launch in US is expected to significantly strengthen company's performance in FY 10.
Carbapenems Segment: It has two premium carbapenem generic products which has major market in US and Europe. Currently they constitute over USD 1 billion opportunity. This segment is expected to contribute to the company's revenue from early 2010-11.
Non-antibiotics Segment: In this segment, the company has identified basket comprising over 60 products across diverse therapeutic segments. Of this pool, the company entered into marketing alliances for 20 products in US and Europe with prominent players. It is expected to yield significant returns from 2011-12 onwards.
Para IV first-to-file applications: The company has filed 7 applications in this space. Also it is working on Para IV first to file applications for five products which provide a sizeable business opportunity.

Regulatory Achievements

In formulation space, the company's cumulative ANDA filings in US as of June 30 2009 stood at 58 – 29 in cephalosporin space, 5 in betalactam space, 3 in carbapenem space and 21 in NPNC segment (of which 7 are Para IV, first to file applications). It has received US FDA approvals for 37 ANDAs upto Sept '09.
The cumulative count of marketing authorization applications in Europe was 29 as of June 30 2009 of which 4 have received approval from regulatory authorities.
In API segment, its cumulative US FDA DMF count stood at 72 as of June 30 2009. Its cumulative certificate of Suitability (CoS) count stood at 20 as of June 30 2009 in European market.

R&D

It entered cardio vascular drug discovery segment forging a strategic relationship with Diakron Pharmaceuticals, Inc for development and manufacture of an anti-coagulant drug candidate.
It entered into multi million dollar licensing agreement with Merck & Co for discovery of anti bacterial drug candidates and their development through Phase IIa human clinical trails.
In the four core four therapeutic areas – diabetes, pain management, oncology and anti-infection as key focus therapeutic segments, a number of new prospective NCEs have been synthesized and are under development. Two molecules, one in inflammation and other in oncology are undergoing regulatory toxicology studies.

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