Recommendation: Buy
Price target: Rs 355
Current market price: Rs 260
Early launch of cefoxitinKey points
- Orchid Chemicals and Pharmaceuticals has received the US Food and Drug Administration's (USFDA) approval for 1 gm/vial and 2 gm/vial of Cefoxitin, a second-generation cephalosporin having a market size of US$45.million. Orchid is launching this product in the USA exclusively through Apotex from January28, 2006.
- Limited competition due to technology barrier and a good marketing network through Apotex are expected to prevent price erosion and result in large Orchid's share in the Cefoxitin market.
- The launch of Cefoxitin earlier than expected is a positive surprise. At the current market price of Rs260, Orchid is trading at 7.7x its FY2007E cash earnings per share (EPS). We reiterate our Buy recommendation on Orchid with the price target of Rs355.
