Orchid Pharma Q3 Results Review: Systematix Recommends 'Buy' On The Stock — Here's Why

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Systematix Research Report

Orchid Pharma Ltd. reported revenue (Rs 2,173 million, down 1.5% YoY and 2.4% QoQ) was lower than consensus expectations (18% lower), while operating Ebitda stood at Rs 264 million, down 25.5% YoY & 13.1% QoQ.

The Q3 underperformance is on account of a sharp correction in prices in export markets. A one time cost of Rs 30 million (regulatory issues) and ongoing burn in the AMS division that is set up for promoting branded formulation business in India has also impacted Ebitda negatively by 15% to 20% during the quarter. On a 9M basis, performance remains strong, with company delivering revenue / Ebitda and PAT growth of 14% / 16% /26% respectively.

During the quarter, company realized royalties from its new chemical entity asset, but was not material. It has only been a quarter since the NCE asset was launched in Europe. The US launch is still awaited. We expect the royalty revenue stream to gain traction as the US launch happens and Enmetazobactam gains market share in Europe.

Going forward, company continues to guide for a 20% revenue CAGR, with 100bps margin expansion. Growth going forward should pick up as multiple new commercialization initiatives should start reflecting in financial performance –

1. commercialization of the new oral API facility,

2. Commencement of operations in branded formulation business and

3. commercialization of Enmetazobactam in Europe and India.

Enmetazobactam‘s contribution to Ebitda is expected to ramp-up meaningfully by FY26. From a medium to long term growth perspective, 7-ACA and cefiderocol projects remain on track. However, US and China commercialization is still awaited for Enmetazobactam.

Orchid Pharma is also looking to tap into generic ceftazidime / avibactam market in US and EU and is working on a non-infringing route to gain an early entry. It is currently in the process of preparing the DMF for EU.

We tweak our estimates on Orchid Pharma and role forward to FY27 estimates. We recommend a Buy with a target price of Rs 1,843 based on 40x PE Multiple.

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