Orchid Pharma signs MoU to license 7ACA technology

Orchid Pharma and its wholly owned subsidiary Orchid Bio Pharma have entered into a Memorandum of Understanding with a foreign technology provider to in-license “7ACA,” a technology designed to reduce import dependency and improve margins through backward integration.

7-ACA (7-aminocephalosporanic acid) is the core chemical structure for the synthesis of cephalosporin antibiotics and intermediates.

In a regulatory filing, Orchid Pharma, owned by Dhanuka Laboratories, said that on July 16, 2022, Orchid-Bio Pharma Ltd received approval from the Competent Authority under the Production Linked Incentive (PLI) program to manufacture the product “7 ACA” and the current MoU received is intended to in-license the 7 ACA technology.

Last July, Orchid Pharma announced that its subsidiary Orchid Bio-Pharma had received approval from IFCI to manufacture “7 ACA” with a committed capacity of 1,000 tons per year. The company then said the technology will help with backward integration, reducing reliance on sourcing from China and helping improve margins.

In the earnings call for Q3FY23, Mridul Dhanuka, full-time director of Orchid Pharma, said the company is currently operating at a gross margin of 40-40.5 percent and could grow 1-2 percent in the future. “Many of these synergies will be more pronounced when our PLI project is implemented and we would have internally backwards integrated some of the key raw materials.”

On Friday, shares in Chennai-based Orchid Pharma on the NSE closed at £377 a share, down 11.5 percent from the previous day’s close.