Chennai-based cephalosporin bulk drug company Orchid Chemicals and Pharmaceuticals Ltd. Wednesday announced sale of its penicillin, penem API (active pharmaceutical ingredients) business and the API facilities in Maharashtra along with the R&D facilities in Chennai for around $200 million to Hospira, a global leader in injectibles space.

The proceeds from the deal will be utilised for de-leveraging Orchid's debt position and also pave the entry for the company's foray into newer product verticals, the company said in a statement.

The business transfer agreement includes transfer of the related penicillin and penem product portfolio and pipeline as well as 830 employees.

As some of Orchid's API requirements for the non-penicillin, non-penem, non-cephalosporin (NPNC) business were supplied by the Aurangabad facility, Hospira will supply such NPNC API to Orchid through a long-term agreement that both companies have entered into.

This agreement builds on the existing product development and commercialisation relationship between Hospira and Orchid.

Orchid would continue to supply its cephalosporin APIs to Hospira, according to the long-term supply contract.

"This business transfer agreement with Hospira will help us fast-track our future growth while maintaining a healthy debt profile in our balance sheet". 

"Given the current scenario, it is a prudent decision for Orchid to monetise these verticals and bring in cash to de-leverage its debt position and fund newer growth horizons," K. Raghavendra Rao, chairman and managing director of Orchid, said in the statement.

"Our game plan is to develop speciality injectible business in antibiotics, oncology products (with joint venture with Cadilla Healthcare) and set up a unit in Visakhapatnam for small volume parentarals," C. Bhaktavatsala Rao, managing director of Hospira India, told IANS.

He added the acquisition demonstrates Hospira's continued dedication to the antibiotics space, enhancing cost-competitiveness and ensuring continuity of supply.

Informed sources said that Hospira was almost the sole customer for products made by Orchid at its Aurangabad facility.

According to Hospira, the proposed acquisition follows its 2010 purchase of Orchid's generic injectable finished-dosage from pharmaceuticals business.

The deal will enable Hospira to vertically integrate into certain critical beta-lactam antibiotic APIs (penems and penicillins), and is also expected to improve Hospira's standard cost position in this therapeutic space.

Orchid said the deal was approved by the boards of the two companies and the entire transaction was expected to be over in the third quarter of the current fiscal.