Orchid Pharma Ltd

Stock Opportunities Untested - but worth a good look
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Orchid pharma partnered with Cipla to launch Cefepime-Enmetazobactum in India.

This is probably one of the best thing done by Orchid in marketing new drug.
Definitely there will more interest for novel drug + known company(Cipla) than novel drug+ not a known company( Orchid), not purely based on scientific reasons though. Many professional would not have heard orchid pharma name , where as Cipla is established company with good presence, brands and already supplying many antimicrobials like Tazact(pipercillin tazobactum),Merocrit( meropenem) , Vanlid( vancomycin), Tiganex( tigecycline) etc…which are used in hospitals/critical care.
Even though Orchid has mentioned that they will be launching their own hospital division in few quarters that would have delayed the ramp up in sales and reach across the country.

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Orchid Pharma -

Q4 and FY 24 concall and results highlights -

Q4 outcomes -

Sales - 217 vs 209 cr
EBITDA - 42 vs 41 cr
PAT - 33 vs 66 cr (due exceptional gain in previous FY)

FY 24 outcomes -

Sales - 819 vs 666 cr
EBITDA - 154 vs 132 cr ( margins @ 17 vs 16 pc )
PAT - 94 vs 55 cr ( despite exceptional gain of 32 cr in Q4 of last FY )

Enmetazobactum has been approved in both US and EU. This opens up lucrative royalty opportunities for the company in the near future

Expected to launch Enmetazobactum in India by Q2 FY 25. Have partnered with Cipla for sales and marketing in the Indian mkt

Have filed ANDA for Cefepime + Enmetazobactum combination in the US mkt. This should also aid company’s US revenues in a meaningful way

Have completed the land acquisition near Jammu for company’s 7ACA project ( it is a key intermediate for manufacture of Cephlalosporins ). Should commission this facility by Mar 26. Aim to ramp up production to > 60 pc levels within first year of operations

Should also be able to commercialise the Cefiderocol manufacturing facility ( a molecule in-licensed from Shionogi, Japan ) by mid 2026

Regulated : Unregulated revenue share @ 40 : 60

Oral : Sterile revenue share @ 75 : 25

Company’s base business ( except Cefiderocol, Enmetazobactum ) should continue to grow at 20 pc CAGR for next 2-3 yrs

Company has hired 40 odd employees to launch their dedicated hospitals division selling antibiotics directly to Tier-1,2 city hospitals

Company has out-licensed Enmetazobactum to Allecra Therapeutics for sale in US and Europe. Expected to be launched by Q2 FY 25 ( tentatively ). After the ramp up is complete ( in 2-3 yrs ) expected to generate a topline of $ 200 - 300 million with a 6-8 pc kind of royalty to Orchid Pharma

Disc: holding, biased, not SEBI registered

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Orchid Pharma Forms Orchid AMS | NDTV Profit (youtube.com)
Interview with the CEO, Rajnish Rohtagi.

  • Expects 250-300 Cr in the new division in next 2-3 years. This roughly provides us a 10-12k crores addressable market (injectables not oral: ICU, hospital wards), and we are targeting a 3000 cr market, this translates to a 10% market share.
  • Sales to begin in next 2-3 Months in this division.
  • The division will primarily focus on injectable antibiotics used in hospitals, avoiding the crowded oral tablet market.
  • Sales will come from a wide range of Antibiotics.
  • The division plans to launch over 30 antibiotic molecules within the next 60 days.
  • Cefiderocol will be launched within the next 1 year - will be the only distributor for it with in India & also be manufacturer/supplier to the sponsor, GARDP.
  • Antibiotics is a hypercompetitive space, but Orchid wants to differentiate itself through a wide product range and addressing AMR in collaboration with hospitals.
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Results Q1

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Below is the link for the latest quarter results

https://www.bseindia.com/xml-data/corpfiling/AttachLive/01292b1b-b156-42ba-9183-e2f424bd62ff.pdf

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Interview with Manish Dhanuka, Managing Director, Orchid Pharma
(https://www.youtube.com/watch?v=YAfWS0bMJow)

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Orchid - Investor Roadshows

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Orchid Pharma Result update - Inline Revenue, gross margins come higher

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Further to my view above about clear line of sight of 400-500cr PAT in 3-4 yrs, the latest concall provided further clarity as to what to expect beyond that.

3 key takewawys for me:

  1. Orchid is well poised to be a leader in the new molecules which would be going off patent as most of these would be in the injectable space. (Note: there is only 1 FDA approved Cephalosporin sterile facility in India and only 1 in China as per Orchid ppt Nov 2023)
  2. 7ACA project will act as a launchpad for the fermentation based drug research and development
  3. Cefidorocol project with Shinogi will demonstrate company’s capabilities, opening opportunities to manufacture for other innovators as well (CMO). This will also include an element of development (D), in other words CDMO but at a bigger scale and with instant commercialization.

All this implies that after the initial 3-4 year period, in which the PAT is expected to reach 400-500cr, the company can keep growing at ~20% or more.
Companies with such growth rates trade above ~60 PE or above. Implying a valuation of above 30,000cr in 3 yrs

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Could someone please explain the rationale behind Debt Management having guided any specific plan for this debt?

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