Orchid Chemicals set for a windfall

Orchid Chemicals set for a windfall
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First Published: Thu, Sep 17 2009. 12 18 AM IST

Updated: Thu, Sep 17 2009. 12 18 AM IST
Orchid Chemicals and Pharmaceuticals Ltd has got a shot in the arm, with the US food and drug administration (FDA) giving approval for
launching the generic version of Wyeth Inc.’s blockbuster drug Zosyn. Orchid has got a 180-day exclusivity period for the launch of this drug, meaning it will be the only drug competing with Zosyn for six months. Of the seven dosage forms/strengths approved for Zosyn, Orchid has got approvals for four. The market size for these dosage forms is estimated at $450 million, (Rs2,178 crore), according to a Reuters news report.
The Orchid management had earlier disclosed in a conference call with analysts that revenues for the current year would rise between 15% and 20%, on the assumption that the generic approval for Zosyn would be received. If the approval hadn’t come, sales for the year would be flat.
Zosyn, an intravenous antibiotic, is a combination drug consisting of piperacillin and tazobactam, and is the largest selling in its segment, according to Wyeth. In calendar 2008, Zosyn’s global sales grew by 11% to $1.26 billion or Rs6,100 crore while sales in the US market grew 22% to $701 million (Rs3,381 crore). In 2009, US sales have grown by 15% but international sales are down, as it faces generic competition in many countries. Orchid has said it will launch the drug through its marketing and distribution partner Apotex Inc.
Graphics: Ahmed Raza Khan / Mint
The company would be in a position to start selling the product soon, as it had already started building up inventory in anticipation of getting this approval. Since there will be only two players for six months, the price erosion due to Orchid’s entry will be considerably less. At present, Orchid expects to get around $120 million in fiscal 2010 from existing products being sold in the US.
Depending on how soon it launches the drug, by how much the price falls and the market share it grabs, Orchid’s sales and profits will get a boost in the next few quarters. After the six-month period gets over, more generics firms will enter the market, taking share from these two companies, and the drug’s price will also fall.
The market expects a windfall for Orchid, with the stock price up 25.6% to Rs159 on the National Stock Exchange on Wednesday. The company had not done well in the June quarter due to higher interest and depreciation costs and forex-related losses, which led to a loss of Rs27.7 crore.
Write to us at marktomarket@ livemint.com
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First Published: Thu, Sep 17 2009. 12 18 AM IST