to 54646 Contact Person: Sagar Karvat - 077383 80033, e-mail

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accounted for 49% of the company’s formulations
revenue in 2009-10.
As Orchid Pharma does not have the expertise in frontend
marketing in regulated markets, it is tying up with
large distribution chains for wider coverage. For the
same reason, it has also acquired US-based company,
Karalex Pharma.
����Semi-regulated Market
Orchid Pharma derives 51% of its formulations revenues
from the semi-regulated markets. The pharma company
focuses on branded generics in semi-regulated markets,
including India.
The company has its own distribution network in most
countries, thereby enabling it to control the total network.
This results in quality control as well as better margins
for the company.
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To be different from the rest, the company has chosen a
unique business segment to position itself. Antiinfectives
is a high-margin, high-entry barrier segment
and hence, keeps a check on competition. And to
leverage the same benefit, Orchid Chemicals & Pharmaceuticals
Ltd has lined up a healthy product pipeline for
the future too.
It has filed 80 DMFs in the US and 21 COS in Europe in
the API segment. Additionally, the company has filed 36
ANDAs in the US and 18 dossiers in EU, for the formulation
division.
The company plans to file 20-22 products every year for
the next three consecutive years, to keep its product
portfolio strong.
We believe that the API supply deal with Hospira would
also provide further benefit, once Hospira gets product
approvals for the carbapenems facility, which will also
add to the revenues of Orchid Pharma.
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By selling its business to Hospira, Orchid Pharma paid
off its debts, making the company’s balance sheet less
leveraged and thus increasing the cash flow of the
company too.
The debt to equity ratio of the company improved from
4.4 pre-deal to around 1.3 after the deal. This provides
further headroom to the company to leverage it for any
future expansion.
Beyond Market 04th Feb ’11
����
Movement of currency could adversely impact the
pharma company’s profitability.
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We believe Orchid Chemicals & Pharmaceuticals Ltd is
left with enough engines to keep its growth momentum
going. It has a rich product portfolio.
The company is also expanding its wings in different
geographies by combining various strategies like acquiring
front-end marketing companies, tying-up with
distributors or by having a direct presence in areas it has
the requisite expertise. The company is targeting both
regulated and semi-regulated markets.
Orchid Pharma has a planned strategy to build its product
portfolio. For the same reason, it has lined-up 20 to 22
product launches every year.
The company management is confident of taking its
formulations contribution of 30% to 50% in the near
future to balance the API – formulations mix.
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Particulars (` in Cr) FY09 FY10* 6M FY11
9M FY11
Sales
EBIDTA
% Margin
Adj. PAT#
% Margin
EPS
Equity
Debt
Debt: Equity
1,211.30
285.7
23.60%
(52.2)
-4.30%
(7.4)
670.2
2,596.80
3.9
1,251.00
(171.2)
-13.70%
(555.2)
-44.40%
(78.8)
979.6
1,629.50
1.7
712.7
161.6
22.70%
45.6
6.40%
6.5
1,046.20
1,726.80
1.7
1,159.00
283.3
24.40%
98.2
8.50%
13.9
NA
NA
NA
Source: Company, Nirmal Bang Research
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We find relief in the fact that the promoters of the
company are increasing their stake by 5% (the maximum
limit set by SEBI) every year. They currently hold a
reasonable 31% in the company.
We believe it is a positive development from the
company’s point of view as this shows the management’s
commitment towards the business. The management is
confident of achieving $350 million in revenues with
22% EBITDA margins in FY11, translating into an EPS
of `22.
On the valuation front, we believe that Orchid Pharma is
available at attractive valuations and has a significant
potential upside from the current level��
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