What's Driving Growth For Orchid Pharma

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00:00Hello and welcome to NDTV Profit.

00:10My name is Varsha.

00:11Orchid Pharma is in focus today.

00:13Company reported, recently reported its Q1 numbers wherein if you see good set of numbers

00:18actually.

00:19Revenue was up almost 33 percent, but if you see net profit was up 3x.

00:22Well, to speak more about the numbers and the business outlook, we have with us Mr.

00:27Manish Dhanuka, who is Managing Director of Orchid Pharma.

00:30Well, welcome Mr. Dhanuka.

00:32Well, if you see, was there any one-off factor in Q1 that contributed to, you know, higher

00:39than usual performance for the company?

00:41Typically, we see stronger performance in the second half of the year.

00:45See, we have been trying to achieve a growth of 20 percent over the last few years.

00:52And I think this quarter was reasonably good for us, but I can tell you that we will continue

00:58to have about 20 percent growth.

00:59Yeah, there could be some averaging from quarter to, from one quarter to another quarter.

01:05It depends on our customers' buying pattern, which is not in our control.

01:10So can we see moderation in growth going forward because you say that you are guiding towards

01:1720 percent of growth for the overall FY25?

01:23Overall, that's what we are aiming to do.

01:25But I feel that with the launch of our new drug in India in this quarter, I think we

01:32could probably have a higher growth also.

01:35All right.

01:37Also, we had these two similar capacities which were coming, one on the sterile side

01:42and one on the oral.

01:44And overall, what is the capacity utilization both on sterile and oral?

01:49And is this growth, is pricing-led or volume-led growth?

01:54So it is, it's volume-led growth.

01:56Overall, we have sold more in quantities.

01:59With respect to your question on capacities, I think we have already enhanced our capacities

02:06in both sterile and one set of enhancement in the oral capacities also.

02:12And at this point, I would say we are around 70 to 80 percent utilization.

02:17All right.

02:17So considering 70 to 80 percent of utilization, what is the CAPEX plan going forward for FY25

02:24and FY26?

02:26See, largely, we have three set of projects going on at this time.

02:29One is our largest investment, which is into the 7-ACA plant being set up in Jammu.

02:36That will entail an investment of around Rs. 600 crores.

02:41Then we have another set of investment for manufacturing injections based on our agreement

02:47with GARDP.

02:48This is the Shinogi proprietary drug, which we have licensed in.

02:53This would require an investment of around Rs. 150 crores.

02:57And the third one is for further enhancement of our oral APIs, which will probably need

03:04about Rs. 80 to Rs. 100 crores.

03:05So these are the three investment plans going on at this time.

03:09Understood.

03:10Well, you're this new 7-ACA manufacturing plant in Jammu.

03:15Will this help to improve margins?

03:17Because this will allow you to produce more value-added products.

03:22Yeah.

03:22So the basic idea of the PLI scheme is indigenization of all the key raw materials.

03:30And I think it will definitely de-risk ourselves from our sourcing of this key raw material

03:35from China.

03:37And we are very hopeful that we will be able to manufacture it at a very competitive cost.

03:42And it would definitely, in that case, help us in improving our overall cost efficiency.

03:51Well, but this 7-ACA manufacturing plant will come post FY26, if I'm not wrong.

04:00Right.

04:00So in FY25, where do we see your margins from current around 13%?

04:07So you see, we are continuing to grow our sales in various markets.

04:12So as we've seen in the last two, three years, when we increase our sales, our overall expenditure

04:19gets spread out evenly.

04:20And in terms of percentage, if you see, our percentage expenses, the manufacturing expenses

04:27have gone down by 3% in percentage terms.

04:30The other expenses have also gone down by 3%, 4%.

04:33Employee expenses have gone down by 1%.

04:35So that's going to basically lead to growth in the profitability.

04:41In addition to that, the new molecule that we will be now distributing along with CIPLA,

04:48that should also add to our bottom line.

04:51So this current 13% margin, can we see an uptick of maybe 100 to 150 basis points in

04:57FY25 especially?

05:00It's actually difficult to give guidance on this because we are working on multiple

05:06models at this point of time and how they will pan out is difficult to predict.

05:11Well, your new antibiotic drug, which you have partnered with CIPLA as well for distribution,

05:18are we on track to launch this?

05:20Because I believe that in August or September, we were expected to launch this product.

05:26Yeah, we should be able to make the drug available in the month of September, yes.

05:31And with this, maybe in the next one to two years, the new additions that you are adding

05:37into your portfolio, what is the incremental revenue that you are targeting in the next

05:43two years?

05:44So along with this new drug, we are also launching our new critical care division known as the

05:51ORCID-AMS, in which we will focus on the antimicrobial solutions.

05:55And this is a hospital-based business where we will have a wide portfolio of antibiotics.

06:02And we will like to promote the antibiotics to hospitals in a different, in kind of a

06:07different business model.

06:10And we hope that this business can pick up to become a reasonably large share of our

06:17overall revenue.

06:20Okay.

06:22And also, do you have any updates on business development when it comes to US?

06:27How was this year?

06:28And how are you targeting next year, especially considering one of your main customers lost

06:34its US FTA?

06:36Yeah, so the development with some other customers are going on.

06:40This customer we had developed some two years back.

06:43So we have also ceded our samples and other documents to other customers who have filed

06:49to include ORCID as one of the sources.

06:52That is a continuous exercise.

06:54And what happens to the customer is not in our control.

06:57At the same time, we have also filed an A&E of our own.

07:01And hopefully, we should be able to get that registration in, say, about two years' time.

07:07So that should add to revenue after two years.

07:11Understood.

07:12Also, I wanted the revenue breakup of your regulated versus unregulated market.

07:18And where do you want to take this contribution to?

07:22So this is actually largely not in our control.

07:26I would rather say that since the majority of the growth comes from the non-regulated

07:31markets, the antibiotic business in the regulated markets is largely saturated, except for the

07:38molecules which go off patent.

07:40That is the only area where you can get growth in the antibiotics at this point of time.

07:46So I believe largely growth will come from non-regulated markets.

07:50And the share of non-regulated markets should grow significantly.

07:55But I think considering the distribution of expenses around a larger set of turnover,

08:01that should increase both our top line and bottom line.

08:05All right.

08:07Last question before I let you go.

08:10Do you have any update when it comes to Dhanuka merger?

08:13What are the timelines?

08:14What are the remaining steps?

08:16So we had filed this sometime in December.

08:20The stock exchanges, I believe, have sent it to SEBI.

08:23We are answering some of the queries from SEBI.

08:26And hopefully that should be cleared from SEBI.

08:28At least we are hoping within this month.

08:30And then we will have to take it up with NCLD.

08:34Giving a timeline would not be in our control.

08:37All right.

08:37Understood.

08:38Well, thank you so much, Mr. Dhanuka, for answering our questions and all the best for

08:42the business.

08:44Thank you for having me.

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