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Biotech / Medical : PFE (Pfizer) How high will it go? -- Ignore unavailable to you. Want to Upgrade?

To: Anthony Wong who wrote (7264)	3/21/1999 6:15:00 PM
From: Anthony Wong	Respond to of 9523

03/20 20:38 FEATURE-India's Orchid blooms in drug sector By Suresh Seshadri MADRAS, India, March 21 (Reuters) - Like the flower from which it takes its name, India's Orchid Chemicals and Pharmaceuticals Ltd <ORCD.BO> has been an exotic bloom in the country's sheltered pharmaceuticals sector. Since it began commercial operations in February 1994, the bulk drugs maker has blossomed. Its turnover grew to 2.42 billion rupees ($56.94 million) in the fiscal year to March 1998, from 435.71 million rupees ($10.25 million) in the fiscal year ending March 1995. Today, Orchid -- based in the southern city of Madras -- is not only India's largest producer of the cephalosporin class of antibiotics, but ranks among the world's top five cephalosporin producers and exporters. In 1997/98 the firm produced 382.28 metric tonnes of cephalosporins, which it then sold to drug makers in about 35 countries across the globe. LEVERAGING PATENT LAWS The company's strategy has been fairly simple. Take a drug which is patented, develop a brand new process for making it using indigenous research capability, make it in bulk and then export it to non-patent markets, riding on the competitive cost advantage that India provides. "Their strength has been the speed with which they have identified molecules, re-engineered them and offered them to the market when prices are still high enough to net a good profit," said P. Krishnan, an equity analyst with a foreign fund. India's prevailing, decades-old, patent law recognises only process patents and not product patents. But lawmakers this month approved a bill to provide transitional marketing rights to foreign drug firms, ahead of an eventual changeover to product patents by 2005 under World Trade Organisation (WTO) rules. Firms like Orchid have used the window provided by the WTO to export the drugs they make using unique processes to countries that do not recognise product patents while at the same time launching these drugs in the domestic market. FORMULATING FREEDOM FROM RISK For a company which started off with just one antibiotic when it began exports in 1994, Orchid has fast learned that bulk drug markets tend to behave like commodity markets, and has realised the need for a hedge against falling prices. Besides making more than 10 different antibiotic molecules for oral and injectible administration, today the firm also produces anti-ulcer, cardiovascular and anti-inflammatory drugs. Last year, it went one step further and obtained permission from the Indian government to begin exports of sildenafil citrate, the key ingredient in Pfizer Inc's <PFE.N> best-selling anti-impotence drug, Viagra. "No shipments have been made till now but that's only because the registration of formulators in their respective countries is taking longer than anyone anticipated," said Orchid Managing Director Raghavendra Rao. Orchid also recently entered the domestic market for drug formulations, launching a range of injectible antibiotics and anti-inflammatory analgesics. The company, which plans to have launched a total of 22 products by the end of 1999, is targeting sales of 500 million rupees in 1999/2000, its first full year in the Indian market. FUTURE FRAUGHT WITH RISKS, OPPORTUNITIES But Orchid, like most other Indian drug firms, will soon have to contend with competition from global drug majors in the home market besides readying for a common product patent regime that all WTO members will have to adopt in 2005. "Orchid's foray into formulations has come at a time when the market is about to get more competitive with the bill (patent reform) giving a new direction...foreign companies will start to look at India and this will present threats," Krishnan said. Falling bulk drug prices are also likely to squeeze margins, especially when resources are required for new research. The firm is busy adding to its existing 450-tonne-per-year drug manufacturing facility at Alathur near Madras by building a new 250-million-rupee research and manufacturing facility at Irungattukottai, just west of the city. "Unlike some drug firms, I don't think this company is cash rich just now, their debt level is high and with bulk drug prices under pressure, it looks tough in the near term," Krishnan said. But Rao said Orchid is "aiming at at least 30 percent growth in both top and bottom line in the coming year". "As an organisation, I realise that we must have strategic alliances for the future of the company especially from 2005...and we are prepared to look at it," Rao said. moneynet.com@NEWS-P2&Index=0&HeadlineURL=../News/NewsHeadlines.asp&DISABLE_FORM=&NAVSVC=News\Company