Q2 earnings (for the quarter ended September 30, 2008)

The Chennai-based pharma major, Orchid Chemicals & Pharmaceuticals Ltd. (Orchid) achieved a higher turnover and operating income of Rs 348.45 crore for the quarter ended September 30, 2008 (Q2 FY 2008-09) in comparison to Rs 293.59 crore registered during the corresponding quarter of the last fiscal. Earnings before Interest & Tax (EBIT) stood at Rs 67.22 crore compared to Rs 81.67 crore of the corresponding quarter of last year. Due to the sharp depreciation in the value of Rupee vis-à-vis Dollar, a notional loss on FCCBs is reflected in the accounts as opposed to the notional gain reflected in the accounts of the corresponding quarter of the previous fiscal. Profit/(loss) before tax (prior to exceptional item on account of exchange (loss)/gain on the FCCBs) was Rs 36 crore as against Rs 64.52 crore of the corresponding Q2 of the last fiscal. After considering the exceptional item on account of exchange (loss)/gain on the FCCBs, the profit/(loss) before tax for the second quarter was at Rs (45.58) crore compared to Rs 84.28 crore during the corresponding Q2 of the last fiscal. During the quarter, at the net level, the company registered a loss (due to the loss on the exceptional item of Rs 81.58 crore) of Rs (40.66) crore compared to a PAT of Rs 63.27 crore (which included the exceptional item gain of Rs 19.76 crore) of the corresponding Q2 of the last fiscal.

H1 earnings (for the half year ended September 30, 2008) – Standalone

Orchid’s revenues for the half-year (H1) ended September 30, 2008 increased by 23.6% and stood at Rs 654.77 crore compared to Rs 529.87 crore registered during the corresponding period of last fiscal. Earnings before Interest & Tax (EBIT) stood at Rs 124.39 crore compared to Rs 124.90 crore registered during the corresponding H1 of the last fiscal. Profit/(loss) after tax (after considering a loss of Rs 140.37 crore due to the exceptional item of foreign exchange loss on FCCBs) stood at Rs (72.31) crore as compared to Rs 114.57 crore of the corresponding half-year of last fiscal (which included an exceptional item due to foreign exchange gain on FCCBs of Rs 72.62 crore).

From the Managing Director

“The second quarter of this fiscal has witnessed several milestones in our operational journey. Key developments in the twin growth verticals of generics and R&D have positioned the company strongly and will aid robust performance patterns going forward. Our entry into the EU generics market with the approval of key product Piperacillin-Tazobactam is noteworthy and should lead to a strong revenue stream from Q3 onwards. With the pace of our regulatory filings being enhanced, with a particular focus on injectables and Para IV FTF products, we are confident of a robust pipeline that can witness a niche market presence across major markets like US & EU in the further quarters. In the R&D space, we are extremely confident of our initiative through Diakron to take forward the Merck Phase I anti-coagulant compound and our research collaboration with Merck & Company Inc. to discover, develop and commercialize novel anti-infective drugs. These seeds of innovation would ensure a strong growth path going forward”, said Mr K Raghavendra Rao, Managing Director, Orchid Chemicals & Pharmaceuticals Ltd.

Generics update

During the second quarter of this fiscal, Orchid continued to derive strong revenues from the US generics market. Earlier launched products like Cefoxitin, Ceftriaxone, Cefepime and Cefdinir continued to garner robust revenues. Competitive pricing and robust supply chain capabilities have helped the company to maintain market shares despite additional competition in certain products.

The company also received its first MA (Marketing Authorisation) approval for Piperacillin-Tazobactam in the EU market during the second quarter of this fiscal. This approval will spearhead the European generics foray in distribution partnership with Hospira, a leading global injectable generics player and will lead to a strong revenue base for the company in this geography from the current quarter onwards.

The product has already been launched in Australia through Hospira and in Canada through Apotex.

Regulatory update

During the quarter under review, Orchid continued to enhance its product pipeline by filing regulatory documentation (DMFs / ANDAs & MAs) in major generic markets of the world.

In the API (Active Pharmaceutical Ingredient) segment, Orchid increased the cumulative filing count of its US DMFs to 64. Of these, 26 correspond to the Cephalosporin space, 26 to the NPNC space, 2 in the penicillin injectables space and 10 in the Carbapenems product space. During the quarter under review, Orchid’s cumulative filings of Certificates of Suitability (CoS) for the EU market also increased to 20.

The company during the quarter filed an additional 3 ANDAs (Abbreviated New Drug Application) taking the cumulative count to 53 ANDAs till date. Of the total ANDAs filed, 29 are in the cephalosporin area, 18 in non-penicillin, non-cephalosporin (NPNC) and 5 in the penicillin product segment and 1 in the Carbapenem space. Orchid has received approvals for 28 ANDAs till date.

The country-wise approvals for Piperacillin-Tazobactam injections have started flowing in pursuant to DCP approval. Orchid has so far filed 19 dossiers for MAs (Marketing Authorisations) comprising 15 in the Cephalosporins space and 1 in the sterile penicillin space and 3 in the NPNC space.

During the quarter under review, Orchid filed another Para IV-FTF (First-to-file) product with the US FDA thereby taking the total FTF count to 6.

During the quarter under review, the non-penicillin, non-cephalosporin dosage forms facility at Irungattukottai, Chennai underwent a successful inspection by the UK MHRA. Receipt of the formal approval in due course will enable the company step up its foray into the EU NPNC generics space.

R&D Update

During the quarter under review, Orchid acquired a significant stake in the US-based drug discovery and development company, Diakron Pharmaceuticals Inc. to co-develop a novel investigational oral anticoagulant drug, in-licensed by Diakron from Merck. The target will be to develop the compound as a novel oral anticoagulant and position it uniquely first for the prophylaxis and treatment of deep vein thrombosis in patients undergoing hip and knee replacement and later for chronic use indications. Both these therapies have wide market potential. Diakron has also other products especially T-Calcium Channel Blockers in its fold which can be pursued separately.

In a first of its kind initiative, Orchid through its research subsidiary, Orchid Research Laboratories (ORL) entered into a strategic research collaboration and licence agreement with Merck & Co Inc. to discover, develop and commercialize novel agents for the treatment of bacterial and fungal infections. Through this collaboration, both the partners would work to identify and develop novel antibacterial and anti fungal compounds as clinically validated drug candidates. Orchid will undertake discovery and candidate development through Phase IIa human clinical trials. Merck will conduct late‐stage clinical development and commercialization based on regulatory approvals.

Orchid has been paid an undisclosed upfront sum on signing of the agreement and would be eligible for milestones totaling more than US$100 million spread over a period of time (besides royalties upon commercialization).