Orchid exits Chinese joint venture
pharmafile | November 15, 2012 | News story | Manufacturing and Production |Â Â North China pharma corp, OrchidÂ
India’s Orchid Chemicals & Pharmaceuticals has ducked out of a joint venture it set up in China ten years ago and will consolidate its manufacturing operations in its home market.
The 50:50 manufacturing JV was set up with North China Pharmaceutical Corp (NCPC) in 2002 to supply active pharmaceutical ingredients (APIs) to local and overseas drugmakers, but has been affected by changing market dynamics in the sector.
“With the local Chinese players fast integrating, the operating conditions have grown quite competitive in China,” commented Orchid’s chairman and managing director Raghavendra Rao.
“The products that the JV manufactures and markets in the local Chinese market have reached a mature stage resulting in flat growth prospects going forward,” he added.
NCPC is paying Orchid a little under $14 million to gain complete ownership of the JV, including its cephalosporin antibiotic API manufacturing facility in Shijiazhuang.
Ahead of the announcement, Orchid reported revenues of $72 million in the second quarter of fiscal 2013, but swung to a net loss of $3.8 million in the period from a profit of $4.4 million a year ago.
Rao said the results reflected “increased interest outflow and the continuing liquidity pressure leading to working capital constraints [that] have impacted the revenues and profitability during the second quarter/half year”.
He said the company is working on a long-term growth strategy – spanning a revamp of its existing business and a move into new product categories – “which should improve the revenue and margin profile” in the next fiscal year.
In September Orchid sold off a manufacturing facility specialising in penicillin and carbapenem antibiotics to US injectable drugs specialist Hospira, two years after the US firm bought its generic injectable finished-dosage form pharmaceuticals business in a $400m deal.
Phil Taylor
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