A formal announcement is expected in four weeks time as to the nature of the tie-up with international companies, managing director K Raghavendra Rao said at a media meet on Thursday.

The tie-up could work in four ways, Rao said. Orchid could just be a bulk supplier (in non-cephalosporin areas) to the concerned company or the two could jointly identify futuristic products which could be produced by Orchid and sold by the latter. The third option would be that Orchid could have a joint venture with a foreign company with a two-way investment into research and technology or, fourth, both would have a long term commitment in sharing of profits in particular products.

While finding regulated markets with committed sales in various bulk drugs is going to be an important driver for the company as opposed to spot selling practice now, Orchid is going to pay equal importance to R&D activities for which it is sourcing equipment. International retail marketing reach and brand building activities within the country would also be an immediate focus area, Rao said.

Of the Rs 175-crore funds from Schroder, which was approved in an EGM on Thursday, 10-15 per cent will be utilised in R&D, 10 per cent in international marketing, 25 per cent for non-cephalosporin production, 25 per cent for formulations, 5 per cent for cephalosporins and the balance for short and long-term working capital.

The Schroder investment would enable the company to generate Rs 90 crore internally within 18 months to expend further into the company, Rao said.Orchid is opening four offices for marketing in Europe, the US, far east and Africa. Ruling out entry into ADR and GDR markets for the next two years, Rao said that as a first step it will have a marketing subsidiary in the UK with a majority stake for direct marketing of neutraceutical products (products having anti-oxidants) products. In the next couple of years Orchid will introduce ayurvedic drugs complete with toxicity studies and scientific back up in areas such as liver cure, antidiabetics, and reduction. This will be apart from the therapeutic areas identified already for formulation such as cardiovascular, pain killers, neutraceuticals.

The bulk drug facility to back production of these drugs as also overseas exports will be modular in structure, designed to get approvals from FDA, MCA (UK) and MCC (S Africa). The same will hold good for formulations. FDA approvals for some injectible and oral cephalosporins are expected to be through by March 2000.

Rao said that the on-going projects for bulk drug (100 tpa) and formulations will be completed in 15 months. While the company is expecting a 30 per cent growth in turnover for the year and 25 per cent growth in bottom line, the formulations division is expected to contribute Rs 30 crore with marginal profits.

Sales for the half year ended September 1999 was Rs 175.3 crore (Rs 131.64 crore), up 33.2 per cent. Interest and finance charges were higher at Rs 17.26 crore (Rs 13.65 crore), up 26.4 per cent. Gross profit stood at Rs 32.59 crore while net profit stood at Rs 19.21 crore, up from Rs 17.56 crore an increase of only 9.39 per cent. The lower growth in net profit as opposed to increased turnover is on account of steep increase in finance charges and a higher depreciation of Rs 13.38 crore (Rs 7.33 crore).