Earnings for the quarter ended December 31, 2009 (Q3 FY10)

Standalone earnings

Chennai-based pharma major Orchid Chemicals & Pharmaceuticals Ltd. (Orchid) achieved a turnover and operating income of Rs 332.60 crore for the quarter ended December 31, 2009 (Q3 FY09-10) in comparison to Rs 310.21 crore registered during the corresponding third quarter of last fiscal.

Earnings before Interest & Tax (EBIT) stood at Rs 34.72 crore compared to Rs 66.10 crore during the corresponding quarter of last year.

Loss before tax (prior to exceptional item of Rs 3.81 crore on account of exchange gain on the FCCBs) was Rs 18.88 crore as against Rs 28.13 crore (prior to exceptional item of Rs 31.15 crore on account of exchange loss on the FCCBs) of the corresponding third quarter of the last fiscal. After considering the exceptional item on account of exchange gain on the FCCBs, there was a loss before tax of Rs 15.06 crore in Q3 of this fiscal compared to a loss of Rs 3.02 crore during the corresponding Q3 of the last fiscal.

At the net level, the company registered a loss of Rs 16.86 crore (which included the exceptional item gain of Rs 3.81 crore) compared to a loss of Rs 6.31 crore (which included the exceptional item loss of Rs 31.15 crore) of the corresponding Q3 of the last fiscal. EPS was negative at Rs 2.39 compared to a negative EPS of Rs 0.92 of the corresponding period of last fiscal.

Earnings for the nine months ended December 31, 2009

Standalone earnings

Orchid’s turnover and operating income for the nine months ended December 31, 2009 stood at Rs 955.85 crore as compared to Rs 964.98 crore of the corresponding period of last fiscal. Earnings before Interest & Tax (EBIT) stood at Rs 111.96 crore compared to Rs 190.49 crore registered during the corresponding period of the previous year.

A notional loss on FCCBs on account of the depreciation in the value of Rupee vis-à-vis Dollar resulted in the loss before tax (prior to exceptional item on account of exchange loss on the FCCBs) of Rs 49.92 crore as against a profit before tax of Rs 91.04 crore of the corresponding nine months of the last fiscal. After considering the exceptional item on account of exchange loss on the FCCBs, for the nine months ended December 31, 2009 the company registered a loss of Rs 54.35 crore compared to a loss of Rs 80.49 crore registered during the corresponding nine months of the last fiscal.

At the net (PAT) level, the company registered a loss (due to the loss on the exceptional item of Rs 4.43 crore) of Rs 59.82 crore compared to a loss of Rs 78.62 crore (which included the exceptional item loss of Rs 171.52 crore) of the corresponding nine months of the last fiscal. EPS for the period was negative at Rs 8.49 compared to a negative EPS of Rs 11.46 of the corresponding period of last year.

Quote from the Managing Director

“Orchid’s overall business canvas witnessed a stronger product penetration with the launch of the high-value Piperacillin-Tazobactam product in the US market. With a 6-month marketing exclusivity, we hope to achieve a significant revenue base in the US market upto March 2010. The product would also have a positive impact on the profitability of the company. We have also inked a Business Transfer Agreement with the global injectables company, Hospira whereby we would transfer our Injectable dosage form product development and manufacturing infrastructure and the product pipeline to Hospira for a total cash consideration of USD 400 million. This cash-infusion for Orchid, upon the close of the transaction will help significantly de-lever our balance sheet and give us the financial flexibility to pursue future growth opportunities”, said Mr K Raghavendra Rao, Managing Director, Orchid Chemicals & Pharmaceuticals Ltd.

API Business

For the 3rd quarter ended December 31, 2009, the API business of Orchid registered a sale of Rs 111.80 crore compared to Rs 119.23 crore of the corresponding period of last fiscal. The company’s increasing focus on formulations led to a larger share of the API production being integrated with the manufacture and sale of formulations for various markets, particularly led by the regulated markets.

Formulations Business

Regulated Generics

The 3rd quarter of this fiscal saw Orchid’s regulated formulation generics business achieve a strong position with Piperacillin-Tazobactam leading the product thrust. The other earlier launched products both in the antibiotic and non-antibiotic range continued to post stable sales.

Emerging markets

The Emerging markets (including India) business of Orchid continued to post good growth. This segment registered a turnover of Rs 40.02 crore during the quarter under review.

Regulatory update (Filings & Approvals)

Orchid continued to enhance its regulatory pipeline by filings as well as approvals of various regulatory dossiers, including Abbreviated New Drug Applications (ANDAs) and Marketing Authorisation Applications (MAA’s).

Filings - API

In the API (Active Pharmaceutical Ingredients) segment, Orchid increased its cumulative US DMF count to 76. The break-up of the total filings is: 28 in the Cephalosporin Segment, 35 in the NPNC segment, 2 in the Betalactam segment and 11 in the Carbapenems segment. In the European market space the cumulative count COS (Certificate of Suitability) filings remained at 21 which includes 13 in the Cephalosporin segment, 7 in the NPNC segment and 1 in the Betalactam segment.

In the EU space, the cumulative count of filings of Marketing Authorizations (MA’s) has been 23. The break-up of the total MA filings is: 16 in the Cephalosporin segment, 1 in the Betalactam segment, 4 in the NPNC segment and 2 in the Carbapenems segment. We also have 74 dossier filings that were made through our marketing partners and customers. A few more dossiers are expected to be approved in Q4 of this fiscal, based on the DCP closure by the respective RMS (Reference Member States) countries in the EU.

Filings – Formulations

Orchid’s cumulative ANDA filings for the US market has been at 58. This includes 7 Para IV FTF (First–To–File) filings. The break-up of the total ANDA filings is: 29 in Cephalosporins, 5 in Betalactams, 21 in NPNC and 3 in Penems. Few more ANDAs which are in the advanced stages of development are expected to be filed in ensuing quarters.

Approvals

US

Orchid recently received 2 more tentative ANDA approvals during the current quarter for Ibandronate Sodium Tablets 150 mg and Memantine Hydrochloride Tablets 5mg and 10 mg, taking the cumulative ANDA approval count to 39. The final ANDA approvals are expected in due course. These are Para IV FTF (First-to-file) opportunities. The break-up of the ANDA approval count comprises 26 in the Cephalosporin segment, 2 in the Betalactam segment and 8 in the NPNC segment.

Canada

In the Canadian market the cumulative count of ANDS (Abbreviated New Drug Submission) approvals has been 5, 4 of which are in the Cephalosporin Segment and 1 in the Beta-lactam segment. In the ANZ market the cumulative count of approval remained at 1, which is from the beta-lactam segment.

EU

In the EU market, the cumulative count of Marketing Authorizations (MA’s) approved moved to 12. The break-up of the total MA approval count is: 8 in the Cephalosporin segment, 1 in the Betalactam segment and 3 in the NPNC segment.

Orchid also has another 32 approvals for MAs filed through the marketing partners and customers in the region.

A few more dossiers are expected be approved in the current quarter of this fiscal, based on the DCP closure by the respective RMS (Reference Member States) countries in the EU.

Business Transfer Agreement with Hospira

Orchid entered into a Business Transfer Agreement on December 15, 2009 with Hospira, Inc. for transfer and sale of Orchid’s sterile generic injectable dosage forms business to Hospira for a cash consideration of USD 400 million.

The business to be acquired by Hospira includes Orchid’s sterile betalactam antibiotics manufacturing complex (comprising injectable cephalosporin, penicillin and carbapenem dosage form facilities) and formulations research and development facility, all located at Irungattukottai (Chennai), India as well as its generic injectable product portfolio and pipeline. The employees dedicated to this business will also move to the new entity.

Orchid has also inked a long-term exclusive agreement for Hospira to exclusively source from Orchid the active pharmaceutical ingredients (APIs) for the acquired generic injectable pharmaceuticals business.
The transaction has been unanimously approved by Hospira's and Orchid's boards of directors. It is subject to Orchid's shareholders and regulatory approvals and other customary closing conditions. The transaction is expected to be completed in the fourth quarter of FY10.

The proposed transaction will help Orchid considerably de-lever its balance sheet and have the financial flexibility to explore new growth opportunities.