Orchid Pharma Ltd

[Shreya28]

About the Company :
Orchid Pharma Ltd., based in Chennai, is a prominent pharmaceutical firm in India. The company specializes in the research, production, and promotion of various bulk actives, formulations, and nutraceuticals. Its global reach extends to over 40 countries through export activities. Orchid Chemicals & Pharmaceuticals Ltd. is a vertically integrated company with a strong presence across the entire pharmaceutical value chain, demonstrating expertise in research, manufacturing, and marketing.

Growth Drivers :

• Integration with Dhanuka Labs through a strategic merger.
• Anticipating a robust financial performance with a projected 24% CAGR in sales, a 38% CAGR in EBITDA, and 49% CAGR in Profit After Tax (PAT) from 2023 to 2026.
• Launching a New Chemical Entity (NCE) on a global scale.
• Exciting plans for re-entering the US market, signaling a strategic move to expand and strengthen market presence.

Stock P/E Ratio : 58.4

Sales :
FY 23 666 cr
FY 22 560 cr

Net Profit :
FY 23 46.3 cr
FY 22 -1.9 cr

Major Mutual fund holdings :
Quant Small Cap Fund
Nippon India Pharma Fund
Quant Multi Asset Fund

Major FII/FPI holding :
MASSACHUSETTS INSTITUTE OF TECHNOLOGY (4.64%)

Manufacturing blocks -

Sterile APIs - 6 Blocks ( 05 crystalline and 01 Lyophilised blocks )
Oral APIs - 07 blocks
Intermediates - 05 blocks

Orchid Pharma (Orchid) is a prominent supplier of cephalosporin APIs, and its recent revitalization under new ownership by Dhanuka has been remarkable, achieving a significant reduction in debt and a threefold increase in Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) within just three years.
Contention is that Orchid is now primed for a growth trajectory driven by:
i) enhanced utilization of its expanded capacities, currently at 75%;
ii) the potential advantages stemming from the Production Linked Incentive (PLI) program for a crucial starting material (7ACA), expected to amplify sales and promote backward integration.; and
iii) the timely implementation of innovative projects, including two with limited competition

Key Risks:

1. Execution Risks: The successful and timely implementation of these initiatives poses a significant risk.

2. Litigation Risks: The introduction of Sterile Abbreviated New Drug Applications (ANDA’s) in the US market hinges on a positive outcome in ongoing legal proceedings.

3. Pricing Risks: Unfavorable shifts in API prices due to changes in competitive dynamics or alterations in supply and demand could present challenges.

4. Regulatory Risks:
   a. ORCP Novel NCE (Enmetazobactam): As Enmetazobactam awaits approval from global regulatory bodies, an adverse regulatory decision could impact our projected outcomes.
   b. GMP Compliance: ORCP’s substantial exposure to regulated markets necessitates the maintenance of its manufacturing facility in compliance with current Good Manufacturing Practice (cGMP) for the continuity of supplies and successful new launches.

Here is a brief analysis on a company I am interested in. Would love to hear about your views on the same.
Disclosure: Invested nominal amount for tracking purposes.

[spartan]

Cefepime+ enmetazobactum(Exblifep) gets a positive opinion for marketing authorization by the committee for medicinal products for human use( CHMP) of the European medical agency. CHMP positive opinion will be referred to the European commission which will grant the final approval in approximately 2 months.

Interestingly, indications mentioned include Hospital acquired pneumonia including ventilator associated pneumonia, even though the original phase 3 study(ALLIUM trial) was done in complicated urinary tract infections. {Exblifep found to have good lung penetration(site of action for pneumonia) in one of the phase2 study}
chmp-summary-positive-opinion-exblifep_en.pdf (163.5 KB)

Current recommendation is based on ALLIUM, a phase 3 multicentre randomized controlled noninferiority double blind trial involving 1034 patients with diagnosis of complicated UTI / Pyelonephritis randomized to receive either Pipercillin-tazobactum ( current standard drug in complicated UTI) VS trial drug Cefepime-enmetazobactum( Exblifep).

EXBLIFEP demonstrated statistically significant superior overall treatment success (clinical cure combined with microbiological eradication) at test-of-care visit compared with piperacillin/tazobactam in cUTI, including AP, caused by Gram-negative pathogens (79.1% vs. 58.9%). Statistically significantly superior results were also observed among patients with infections caused by ESBL-producing pathogens (73.7% vs. 51.5%, respectively) with tolerable safely profile compared to standard drug. Study results were published in original article(behind paywall)

Effect of Cefepime/Enmetazobactam vs Piperacillin/Tazobactam in Complicated...

More details from Allecra website about the drug /study trial.

allecra - home.

Orchid had licensed the Exblifep to Allecra for development/phase3 trial. Allecra inturn has licensed the product to Advanz pharma for commercialisation within the European union,UK, Switzerland and Norway.

Orchid will get royalty of 6-8% on global sales of Exblifep.

Orchid has indicated that( Nov 22 company presentation) estimated annual global sales of USD 200 mn-300mn per year and expected royalty of 16mn-25mn USD/year. With EU approval it’s likely that US FDA approval also should happen soon and global sales may start from the later half of FY25/26.

Orchid retained the right to market the molecule in India. current standard drug Pipercillin tazobactum market size in India in around 800Cr.

Disclosure: invested

[Shreya28]

@spartan

Interestingly, indications mentioned include Hospital acquired pneumonia including ventilator associated pneumonia,

Can this have any impact on the market size of WCK 5222 (cefepime+zidebactam) developed by Wockhardt, mainly targeting hospital acquired infections, ventilator associated pneumonia and other gram negative suberbugs?

[vikasbargale]

Orchid Pharma’s ‘Exblifep’ granted European Medicines Agency
approval - A landmark achievement for India’s pharmaceuƟcal
Industry

Here is the company filing on NSE & BSE

c8393e28-36a1-429f-8eaf-78cdfc9caf47.pdf

Hope it helps.

[Jagjeevan_Kashid]

Conference Call Q3FY24

[Gautam_Chopra]

Some background Around Orchid Pharma and my notes

• Orchids Turnaround
  
  

Cephalosporins (Orchid’s focus) – Largest sub-class within beta lactam

• There are six generations of cephalosporins while the third generation onwards have a strong safety profile and wide coverage of gram-negative bacteria. Orchid has the widest portfolio of more than 30 products across oral and sterile cephalosporins. It has developed products across four generations of cephalosporins and is now developing the fifth- and sixth-generation products.

• Cephalosporins account for 50%+ share of beta Lactam class

• Cephalosporins market – API market valued at ~$2bn

• Cephalosporins have become the preferred class due to their efficacy against a wide range of bacteria and are also well-tolerated by the patients (fewer allergies).

• Orchid owns the only US FDA approved sterile Ceph facility in India.

• 2017 Orchid went “under” and Dhanuka group acquired in 2020 and Dhanuka already had a Ceph API
  business housed under Dhanuka Laboratories Limited (DLL).

• Company has said it will produce 7ACA which is critical raw material in cephalosporin production through PLI scheme.

• Top three products contribute to roughly three-fourths of Orchid’s sales. Cefixime, Cefuroxime Axetil and Cefdinir.

• Orchid will hold 20% in Allecra.

• https://www.business-standard.com/article/companies/orchid-enters-into-strategic-partnership-with-europe-based-allecra-113041800094_1.html

• historically for Orchid first half has been 40% and second half has been 60%.

7-ACA Project

• 7-Aminocephalosporanic acid (7-ACA) is a key intermediate in the production of semisynthetic cephalosporin antibiotics.
• In July 2023, Orchid Pharma announced that its subsidiary, Orchid Bio Pharma, has received approval to manufacture 7-ACA product with a committed capacity of 1,000 tonne per annum. The 7-ACA project is under the production linked incentive (PLI) scheme.
• Registration of the land acquired for 7-ACA project is under progress.
• The strain has been received from their technology partner for pilot plant development.
• 25% captive use + 55% downstream intermediates + 20% external

Cefiderocol

• It’s listed on the WHO Model List of Essential Medicines.
• Orchid Pharma has gained a sublicense agreement to manufacture cefiderocol as part of a global effort to expand antibiotic access worldwide.
• Expertise in cephalosporins will be advantageous in manufacturing affordable and quality-assured cefiderocol,
• Expect to initiate commercial production by 2HFY26.

NCE Enmetazobactam

• Exblifeb incorporates Enmetazobactam : The first completely invented-in-India Beta Lactamase inhibitor. Exblifep | European Medicines Agency
• Enmetazobactam was invented in India by Orchid and then out-licensed to Allecra Therapeutis for further development.
• Recently they have received favourable recommendation for approval from EUCHMP
  and expect USFDA approval soon.
• The company is in talks with DCGI for their nod to waive clinical trials in India. Dialogues are in progress, if waived, can launch immediately or else will get deferred by 6 months to 12 months.
• The company will receive sales royalty of 6-8% sales worldwide
• Orchid holds royalty rights on global sales and marketing rights in India.
• Pfizer had a similar product ‘Zosyn’ - Enmetazobactam has higher efficacy of 79% vs 59% - So math works out for Orchid too.

Capex in Sterile

Orchid’s existing sterile facility is operating at 100% utilisation and thus the company has expanded the sterile capacity in 2QFY24, which again will be fully utilised by 4QFY24.

Expansion in Oral Capacity

Company’s oral capacity is also operating at high utilization of 75% and so it is expanding oral capacity as well (which will commercialize in 1HFY25).

Jammu’s PLI

Jammu to strengthen NPV and financial viability of the 7-ACA project. Apart from the PLI incentives available under Production Linked Incentive (PLI) Scheme for Promotion of Domestic Manufacturing of critical Key Starting Materials (KSMs)/ Drug Intermediates and Active Pharmaceutical Ingredients (APIs) in the Country, the Jammu location provides additional meaningful benefits to Orchid

1. Power is a key component of the total cost of manufacturing 7-ACA, and Jammu has
   the lowest power cost in the country,
2. under the New Central Sector Scheme for Industrial Development of Union Territory of Jammu & Kashmir, ORCHP will be eligible for GST refund at 18%
3. Cumulative PLI incentive of Rs. 6bn

Q3FY24

• Revenue : 10% QoQ 38% YoY
• Low Cost inventory : GM expanded
• EBITDA margin @16%
• Operating Leverage benefit should kick in but this Qtr it (Sterile ) caused Opex
  
  
  
  Land acquisition in Jammu

Antibiotics
Would highly recommend Bharani’s Sir VP post.

Wockhardt - A story with twist and turn

Before I proceed, credit where its due - This idea originated with @Anant whose inputs prodded me to look deeper into this story and @Sanjay_Kumar_E who is the nuts and bolts man whose ability to wade in deeper than the rest regardless of industry is simply unparalleled. I am simply piecing together everything in a way I can explain to my 10 year old son. Understanding Antibiotics I usually avoid stocks with large pledging (I assume fraud), stay away from businesses that are complex to underst…

Beta Lactum

Does serendipity help pharmaceutical companies rake in megabucks?

[dj123]

Microsoft Word - Investor Presentation 09-02-2024 (bseindia.com) why would a pharma company share such a elementary and less detailed investor ppt. @Anant @rupeshtatiya hats off to you guys for probing and asking lot of questions on the concall. The company does look at inflection point and poised for good growth. would you guys mind adding your thoughts on the same.
best
divyansh
disc : invested
one of my core holdings as i m bullish on the whole anti microbial theme

[dj123]

above image explains why gram negative bacteria are more difficult and pose serious threats as compared to gram positive bacteria.

The cephalosporins (sg. /ˌsɛfələˈspɔːrɪn, ˌkɛ-, -loʊ-/[1][2]) are a class of β-lactam antibiotics originally derived from the fungus Acremonium, which was previously known as Cephalosporium.[3]

Together with cephamycins, they constitute a subgroup of β-lactam antibiotics called cephems. Cephalosporins were discovered in 1945, and first sold in 1964.

Cephalosporins are bactericidal and, like other β-lactam antibiotics, disrupt the synthesis of the peptidoglycan layer forming the bacterial cell wall. The peptidoglycan layer is important for cell wall structural integrity. The final transpeptidation step in the synthesis of the peptidoglycan is facilitated by penicillin-binding proteins (PBPs). PBPs bind to the D-Ala-D-Ala at the end of muropeptides (peptidoglycan precursors) to crosslink the peptidoglycan. Beta-lactam antibiotics mimic the D-Ala-D-Ala site, thereby irreversibly inhibiting PBP crosslinking of peptidoglycan.

Third-generation cephalosporins have a broad spectrum of activity and further increased activity against gram-negative organisms. They may be particularly useful in treating hospital-acquired infections, although increasing levels of extended-spectrum beta-lactamases are reducing the clinical utility of this class of antibiotics. They are also able to penetrate the central nervous system, making them useful against meningitis caused by pneumococci, meningococci.

Ceftobiprole has been described as “fifth-generation” cephalosporin,[34][35] though acceptance for this terminology is not universal. Ceftobiprole has anti-pseudomonal activity and appears to be less susceptible to development of resistance. Ceftaroline has also been described as “fifth-generation” cephalosporin, but does not have the activity against Pseudomonas aeruginosa or vancomycin-resistant enterococci that ceftobiprole has.[36] Ceftolozane is an option for the treatment of complicated intra-abdominal infections and complicated urinary tract infections. It is combined with the β-lactamase inhibitor tazobactam, as multi-drug resistant bacterial infections will generally show resistance to all β-lactam antibiotics unless this enzyme is inhibited

[Gautam_Chopra]

Curious case of Orchid Pharma

15,376% Returns Bizarre

Orchid Pharma got listed on 3rd November 2020 @Rs 17.15 and it grew to ATH Rs 2654.25 in the span of 4-5 Months.

March 2017 went to NCLAT - Dhanuka Labs took over - 98% of shareholding of Orchid Pharma - Retail investors who had invested in Orchid pharma were alotted 1 share for every 218 shares they were holding. (217 taken away)

Entity had special treatment and they were holding 98% but with condition that they have to reduce their holding to 75% (which is usually the norm for listed company in india)

Story:

0.5% shares were traded in the market as this was the float at that time.
(2,06,480 shares only)
Scarcity of shares caused price surge. Seeing the price rise others got interested too. Demand for the shares increased leading to further stock price rise.
There were negligible people who were willing to sell and plenty of buyers leading to stock price rise. 5% circuit happened for several 100 consecutive days.

Ruchi soya once more.

SEBI revised the norms after this - Back from the death share holding companies will need to have 5% public shareholding at the time of listing. No more super small shareholding gimmicks. Well.

[ranvir]

ORCHID PHARMA -

Q3, FY 24 highlights -

Revenues- 221 vs 160 cr ( growth driven by - geographical and customer expansion )
EBITDA- 35 vs 14 cr ( margins @ 16 vs 9 pc )
PAT- 29 vs 8 cr

Enmetazobactum has received EU’s approval for a commercial launch. Expecting an approval from US’s regulators in Feb 24

Company commissioned its sterile Cephalosporin blocks in Q3 ( Nov 23 ). Expect to reach 50 pc capacity utilisation in Q4 and 100 pc in next 6-9 months

Don’t expect any major Capex requirements in next 2-3 yrs. Despite that, company should be able to grow its base business by 20-25 pc CAGR via de-bottlenecking of capacities

Like - Cefiderocol, company is exploring partnerships for some other products as well

Dhanuka labs has done a revenue of 400 cr in 9M FY 24. Dhanuka labs - Orchid Pharma merger is about to be consummated

The 7 ACA - KSM manufacturing plant that the company is setting up at Jammu is eligible for a lot of benefits like - PLI, Electricity and Interest rate subventions, GST benefits. Company should be able to make 10 pc EBITDA plus these benefits should add to their margins

Going to launch 02 more products - both Cephalosporins. DMF for one of them has already been filed. DMF for the second one shall be filed by end of this calendar year

Enmetazobactum ( if granted waivers by Indian regulators for clinical trials ) should get an India approval within 6 months. Otherwise, by Q1 FY 26. Company estimates to do a sales of 200 odd cr of this product in India ( 4 pc kind of share of total anti-microbial injectable mkt )

A 20 pc kind of revenue CAGR is doable for next couple of years

Expect Enmetazobactum launch in EU, US in q1 FY 25. Initial growth post launch should be strong

The sales royalty on the sale of Enmetazobactum remains @ 6-8 pc of sales for EU, China, US mkts

Domestic:Export revenues break up @ 18:82 pc ( roughly )

Orchid Pharma is allowed to make 25 kind of PBT margins ( by the innovator - Shionogi - Japan ) on the sales of Cefiderocol in the LMIC Mkts

Disc : holding from lower levels, biased, not SEBI registered

[ganeshrpl]

Orchid Pharma’s ‘Exblifep’ receives USFDA approval: A new milestone for India’s Pharmaceutical industry
Bse notification by Orchid

Orchid Pharma’s ‘Exblifep’ receives USFDA approval: A new milestone for
India’s Pharmaceutical industry

• Orchid is the first Indian company to have invented a product approved under the
  New Drug Application (NDA) process by USFDA
• The European Medicines Agency granted Exblifep approval in January 2024 New Delhi, 23 February 2024: Orchid Pharma, based in Chennai, India, has received approval by the United States Food and Drug Administration (USFDA) for its novel invention, ‘Enmetazobactam’. This development comes in close succession to the recent recommendation for approval by the European Medicines Agency (EMA). Enmetazobactam is the first completely invented-in-India Beta Lactamase Inhibitor.

Orchid is the first company from India, ever to have invented a product which has received a New Drug Approval (NDA) from USFDA.

[anon]

My estimate of Orchid pharma’s earnings in the next 4-5yrs

PAT per year breakdown:

1. Current Biz - 100cr
2. Exblifep - 80cr from International Royalties + 70cr from sales in India (conservatively)
3. Cefiderocol - 100cr (conservatively)
4. (Growth of existing products + Ceftazidime Avibactam + other new para IV ANDA launches in US + other launches in India/abroad) - 100cr
5. Benefits of 7ACA in terms of external sales + margin improvement due to captive use - 70cr

So, there is a clear line of sight of PAT reaching ~500cr in 4-5 yrs.

What is not included in the above estimates are the following upsides which can be really big as well:

1. Any future partnership enhancement with Shionogi wherein Orchid manufacturers products such as Cefiderocol (and perhaps other products as well) for sales throughout the world including in the OECD countries ( and not just for sales in the Low-Medium Income Countries)
2. Any future partnership enhancement with Allecra wherein Orchid is contracted by Allecra to manufacture Exblifep for sales throughout the world. Currently, Orchid can manufacture and sell only in India, and gets 6-8% royalty for global sales which Allecra manufactures itself or sources from others.
3. Any new partnerships with innovators such Shionogi
4. Any new CRAMS/CDMO opportunities

So in a nutshell, Orchid stands at the cusp of something really big - and its difficult to even fathom how big it can be at this stage.

I would expect the stock to trade at a PE multiple of at least 40-60x forward earning, so in 4yrs it could easily reach a valuation of 20,000cr - 30,000cr. Hence, we are witnessing such an explosive move and re-rating of the stock.

[ganeshrpl]

Assamese Scientist Develops 1st Indian Antibiotic Approved By FDA After 16-Year Journey To Market

nice simple article on the man (co-inventor) behind the NCE Enmetazobactam.

[Gautam_Chopra]

Digital biomarkets
DCTs (Decentralized Clinical Trials)
RWEs (real world evidences )

A lot of shift is happening - Drug should develop faster and cheaper. Just like Nvidia talks about innovation. Sajal Sir compared Software and Biotech.

Src: SOIC - Sajal Sir’s Video

[Gautam_Chopra]

With the new drug approval from US FDA and Europe, Orchid is back to bloom

[Gautam_Chopra]

[Shreya28]

e0d9385a-e201-4381-87af-850f15351e97.pdf

Orchid Pharma Limited has received DCGI approval for its first invented and made-in-India Antibiotic Drug Combination of Cefepime and Enmetazobactam.

[Gautam_Chopra]

[vikasbargale]

I am sharing below a teet by Sajal Kapoor on Orchid Pharma.

https://x.com/unseenvalue/status/1805553798577795407

[spartan]

Allecra therapeutics and Acino sign exclusive license and supply agreement for Exblifep( cefepime/enmetazobactum) to commercialize in South africa and member states of Gulf cooperation countries.
Allecra will supply the finished product and Acino will be involved in the registration process of Exblifep in the above countries( most likely marketing too)

Press_Release___Allecra__Acino_240624_FINAL.pdf

we may expect few more such agreements in future: