Graphic: Yogesh Kumar/Mint

Of these eight products, Orchid has already filed abbreviated new drug applications, or Anda, for three of them, and has got tentative approval for two. The remaining products are under development. The earliest launch for these products are expected in calendar 2011. Alvogen said in a statement that they are complex generics with multiple development, manufacturing and intellectual property challenges. The last point refers to the filing of patent challenges by generic companies, to invalidate the patent of the innovator company and get a six-month exclusivity period to sell its generic version.

Like the Glenmark deal, the real benefits of this transaction, too, will depend on the rate of success in patent challenges and the ability to go to get final marketing approvals. But the immediate benefits will be in the form of milestone-based payments to Orchid and sharing of high US litigation costs. The potential market is large and even one or two successful patent challenges can provide a windfall.

The Orchid share barely reacted to the development, partly because of the uncertainties associated with litigation and regulatory approval. Investors will also be concerned with the gap in revenue left after the sale of its sterile injectables business. Orchid will use the sale proceeds to lower its debt burden, strengthening its balance sheet, but investors would also want to see the profit recover soon.

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