Orchid Pharma will shell out Rs 300-500 crore over the next two years to set up a new plant to manufacture critical key starting material or drug intermediaries under the production-linked incentive (PLI) scheme.

The Chennai-based company sees demand in the overseas countries for these fermentation-based intermediaries to be around 2,000 tonne.

Manish Dhanuka, MD, Orchid Pharma, told analysts the government has made provision for two years to set up the plant, and the company expects to set up the facility over that timeline. The capex is expected to be between Rs 300 crore and Rs 500 crore.

The company’s wholly owned subsidiary, Orchid BioPharma, has been approved under the PLI scheme to manufacture the product 7-ACA for 1,000 metric tonne per annum. The approval will help the company in backward integration, reducing dependency on sourcing from China and improving overall margins for the business, Mridul Dhanuka, executive director, Orchid Pharma,said.

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“With this PLI approval, we expect to start the plant in FY24-25. The current import price of this product is at $65. We expect to generate an Ebitda of about 10% in this business. The PLI benefits shall be 20% of the sales price for the first four years of the business, then 15% for one year, and for the last six years would be 5% over and above the Ebitda of 10% that I have estimated,” he said.

On the product pipeline, he said the development of Ceftaroline is on track for a commercial launch in December. The company will be filing the drug master filer for the US market.

The development of Enmetazobactam, a new chemical entity developed by Orchid Pharma for the Indian market, is also on track. The clinical research organisation for the clinical trial has been finalised and the clinical data management site for formulation of the product manufacturing was also closed.

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“Cefovecin, the third product we talked about launching commercially, will be commercialised before March 2023 and Ceftazidime plus Avibactam will be launched in India in January 2023. So, these four launches we are expecting in this financial year. And hopefully they will augur well for the prospects of the company going forward,” he said.