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Business News/ Companies / Orchid to sell penicillin business to US’s Hospira
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Orchid to sell penicillin business to US’s Hospira

Orchid to sell penicillin business to US’s Hospira

Cutting debt: K. Raghavendra Rao, chairman and managing director, Orchid Chemicals and Pharmaceuticals Ltd. Photo: Hemant Mishra/MintPremium

Cutting debt: K. Raghavendra Rao, chairman and managing director, Orchid Chemicals and Pharmaceuticals Ltd. Photo: Hemant Mishra/Mint

Mumbai/ Chennai: Orchid Chemicals and Pharmaceuticals Ltd will sell its anti-bacterial penicillin and penem ingredients business and the factories that produce the medicines to US drug maker Hospira Inc. for about $200 million.

“This business transfer agreement with Hospira will help us fast-track our future growth while maintaining a healthy debt profile in our balance sheet. Given the current scenario, it is a prudent decision for Orchid to monetize these verticals and bring in cash to de-leverage its debt position and fund newer growth horizons," Orchid chairman and managing director K. Raghavendra Rao said on Wednesday.

The transfer includes 830 employees.

Cutting debt: K. Raghavendra Rao, chairman and managing director, Orchid Chemicals and Pharmaceuticals Ltd. Photo: Hemant Mishra/Mint

The Chennai-based drug maker had in 2009 sold its injectables business to Hospira for around $400 million (1,850 crore then). It included Orchid’s beta-lactam antibiotics manufacturing complex and pharmaceutical research and development facility at Irungattukottai in Chennai and its generic injectable product portfolio and pipeline.

Some of Orchid’s active ingredient requirements for the non-antibiotic business were supplied by its Aurangabad facility. After the sale, Hospira will supply these ingredients to Orchid through a long-term agreement. Orchid will continue to supply its antibiotic cephalosporin ingredients to Hospira.

“This business transfer agreement also demonstrates Orchid’s ability to build value in its chosen product domains and successfully monetize them to create value for the stakeholders," Orchid said in a statement. The money from the sale will be used to retire debt and fund the firm’s entry into new product segments, it said.

Latham and Watkins LLP acted as international legal advisors to the deal and Amarchand, Mangaldas and Co. acted as the Indian legal advisor to Orchid.

Orchid’s shares lost 1% to 111.75 on the BSE; the benchmark Sensex shed 0.8%.

ch.unni@livemint.com

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Published: 29 Aug 2012, 10:01 PM IST
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