Orchid Pharma Ltd Q3 FY23 Earnings Conference Call Insights

Key highlights from Orchid Pharma Ltd (ORCHPHARMA) Q3 FY23 Earnings Concall

Q&A Highlights:

• [00:04:43] Himanshu Upadhyay from o3 Capital asked what changed in the DLL and Orchid merger that the merger opinion has been reversed. Manish Dhanuka MD said that the basic philosophy and intent behind the merger has not gone away, but a QIP is needed to meet MPS requirements. Once this is done, the merger will still be proposed in order to take advantage of synergies and have good governance structure.

• [00:08:36] Himanshu Upadhyay from o3 Capital queried what challenges are present and what efforts are being taken to increase the capacity utilization of oral products. Manish Dhanuka MD replied that the intent is to increase both sterile and oral output, however there are two factors that play a role in this. One is the contracts with major innovator companies, which varies. The other factor is increasing the sales of all other products, and ORCHID is heading towards achieving the goal.

• [00:12:32] Sajal Kapoor queried if contract research and manufacturing services is generic or NCE grants. Manish Dhanuka MD answered that it is generic and not NCE.

• [00:16:03] Sajal Kapoor asked about any execution risk on that 7ACA backward integration. Manish Dhanuka MD answered that ORCHPHARMA don’t anticipate many issues, but the only potential area could be technology. The company is in advanced negotiations with a reputable company for a technology transfer agreement and hope to sign it soon, so don’t foresee any problems right now.

• [00:17:17] Viraj Parekh from Carnelian asked that for 9 month FY23, how much revenue was contributed from Europe region. Mridul Dhanuka ED replied that it’s calculated on an annual basis and last year, the company was between 40-45% and similar trend is expected to continue going forward. Additionally, US business started this year, but expect this number to be significant next year.

• [00:18:05] Viraj Parekh from Carnelian enquired about the expected demand environment in Europe in FY24. Mridul Dhanuka ED answered that the company is expecting a better demand this year. With the war going on, healthcare demand in Europe is expected to be higher.

• [00:18:49]  Viraj Parekh from Carnelian asked about the depreciation on a decrease, and if the company has to incur further capex for the outdated machinery. Mridul Dhanuka ED answered that Orchid has invested in world-class equipment and to maintain these assets, it will need INR15-20 crores in marginally capex. The company don’t need any major investments to maintain its current run-rate.

• [00:26:27] Nikhil Upadhyay at Securities Investment enquired about any developments on the sale of Orchid towers. Mridul Dhanuka ED said that the company has signed an ATS with a party, but hopefully the transaction should be concluded before end of March 2023.

• [00:31:43] Rupesh Jain of Intelsense queried about oral capacity utilization and what percentage of total revenue is contract manufacturing. Mridul Dhanuka ED clarified that the company has a long-term manufacturing deal with the innovator, but don’t do contract manufacturing.

• [00:34:07] Rupesh Jain of Intelsense asked about competition scenario with Nectar Lifesciences and others with ORCHID having strong balance sheet and management. Mridul Dhanuka ED answered that the markets are growing and the company is seeing healthy competition. The demand is growing and scope is there for everybody.

• [00:35:02] Rupesh Jain of Intelsense asked about the revenue contribution from US for the nine months FY23. Manish Dhanuka MD replied that currently the revenue contribution is in low single digit, but the CAGR percentage on this business would be much higher than the rest of the business in future.

• Darshan Jhaveri from Crown Capital asked about the proportion of oral and injectable sales. Mridul Dhanuka ED said about one-third of the business is injectables and two-thirds oral.