Hospira buys Orchid generic injectables business for $400m
pharmafile | December 18, 2009 | News story | Manufacturing and Production | Hospira, India, Orchid, injectables
Indian active pharmaceutical ingredient manufacturer Orchid Chemicals & Pharmaceuticals has signed a $400 million deal to sell the assets of its injectable generics business, including manufacturing and R&D facilities, to US drugmaker Hospira.
Hospira is already the world’s largest generic injectables manufacturer, with a particular emphasis on cancer and anti-infective products, and has said it wants to increase its presence in emerging markets.
The deal gives it a beachhead in the Indian pharmaceutical market, and having a manufacturing base in India where patent laws are less stringent will enable Hospira to access countries with no patent laws or where patents expire earlier, said Hospira chief executive Chris Begley on a conference call yesterday (15 December).
“This clearly gives us an opportunity to expand geographically over time,” he said.
Orchid’s manufacturing site in Chennai includes three separate production facilities dedicated to producing beta lactams such as cephalosporin, penem and penicillin antibiotics, expertise Hospira does not currently have in-house.
“Almost a fifth of our pipeline value is made up of beta-lactam antibiotics,” said Begley, noting that the deal also includes a number of Abbreviated New Drug Applications (ANDAs) filed in the US.
The company’s decision to take over the production of these products will improve its operating margins and reduce costs, as well as reducing risk.
Manufacturing beta lactams is a complex, specialist endeavour, and facilities offering this type of capability “are rare in the USA”, according to Begley.
Buying a purpose-built facility is also much less expensive and quicker than embarking on a greenfield development, he added. In addition, Hospira has signed a 10-year agreement for Orchid to supply API for the beta-lactam products that are part of the transaction.
“This is an important aspect of the transaction as it not only ensures stability of supply but also provides us with a cost-competitive position,” said Begley.
The deal also gives Hospira complete control of a portfolio of beta-lactam antibiotics that were previously part of a profit-sharing agreement with Orchid.
The R&D facility is a significant development for Hospira as it will help the company enter into other sectors of the generics market that until now it has not had the capacity to explore, as well as reducing the cost of research.
The transaction is expected to close in the first quarter of 2010, subject to Orchid shareholder approval and regulatory clearances.
Tom Werner, Hospira’s chief financial officer, said that the deal plugged the biggest gap in Hospira’s business portfolio.
Earlier this week the firm announced a licensing deal with ChemGenex for a leukaemia compound, omacetaxine mepesuccinate, to round out its oncology portfolio in Europe.
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