Orchid Pharma Investor Presentation

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CONFIDENTIAL
Orchid A new growth phase
A Presentation
March 2006
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Disclaimer

• This presentation includes forward-looking
  statements / projections, which are based on
  current expectations and forecast about future
  events. Such statements involve known / unknown
  risks uncertainties and other factors and may
  cause and defer the actual results materially.
  Such factors include, but are not limited to,
  changes in local and global economic conditions,
  the Companys ability to successfully implement
  strategies, the market acceptance and demand of
  the Companys products and services, the
  Companys growth rates, expansion, technological
  change and the Companys exposure to market
  risks. By this nature, these indications and
  projections are only estimates and actual results
  could differ from these in the future.
• These materials are not an offer for sale of
  securities in the United States or in any other
  jurisdiction. No securities of the Company may be
  offered or sold in the United States absent
  registration or an exemption from registration
  under the U.S. Securities Act of 1933, as
  amended. The Company does not intend to register
  any of its securities for offer or sale in the
  United States or elsewhere, or to conduct a
  public offering of securities in the United
  States or elsewhere. No money or other
  consideration is being solicited pursuant to
  these materials.

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Key trends in global pharma

• Global pharma offers a huge opportunity USD 518
  billion market (2004), growing at 7 to 9 during
  the last few years US, Europe and Japan
  constitute 87 of the global market
• Generics are a fast growing segment of USD 68
  billion (2004) US, Europe and Japan constitute
  75 of global generics
• Faced with patent expiries, and stagnant RD
  productivity, global pharmas RD budgets (USD 60
  billion plus) could benefit from significant
  off-shoring
• Steady growth of generics on one hand and the
  increasing compulsions for new drugs on the other
  offer a major opportunity for India and Orchid
• Orchids business model focuses on two key
  drivers generics and discovery outsourcing

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Orchid a name in global pharma

• Incorporated in July 1992 as a 100 EOU
  commenced operations in February 1994
• Evolved rapidly into an integrated life sciences
  company with a strong presence across the pharma
  value chain Active pharmaceutical Ingredients
  (APIs), Formulations and Drug discovery
• Leader in high technology life-saving antibiotics
  cephalosporins, betalactams and carbapenems
  with core competencies in sterile injectable
  products
• Revenues of Rs 700 crore human resource base of
  2600 plus 5 manufacturing plants, 2 research
  centres and 2 overseas joint ventures an
  investment base of over Rs 1000 crore

• 11th largest Indian pharmaco, a status achieved
  in just 11 years of operations
• Amongst the Top 5 cephalosporin antibiotic
  producers of the world
• Largest manufacturer-exporter of cephalosporin
  products in India
• 6th largest exporter of pharmaceutical products
  in India
• US FDA approved facilities, both API and
  formulations additional EDQM and TGA
  certifications GLP accredited RD Centre

• ISO certified facilities
• ISO 9001 2000 Quality
• ISO 14001 Environmental Management
• OHSAS 18001 Occupational Health Safety
• Pioneer of zero discharge pharmaceutical
  manufacturing in India
• Recipient of several awards from Government of
  India, Confederation of Indian Industry, Madras
  Management Association and other national and
  international agencies
• Partner of Choice for Competitive Excellence
  awarded by Frost Sullivan

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Orchids vision is to
become an integrated pharmaceutical corporation
of global scale and standing, with a
comprehensive coverage from Discovery to
Delivery
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To fulfill the vision, Orchid has pursued a
strategy to grow the business in multiple horizons
Integrating investments by Schroders and IFC,
Orchid set up world-class research and
manufacturing facilities, US FDA compliant, to
implement the multi-horizon business strategy
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Orchid achieved aggressive organic and inorganic
business development, value added by joint
ventures and strategic alliances
Horizon 3
NDD NDDS research Biotech Research
Horizon 2
Generics (US EU) Formulations
Horizon 1
Bulk - Unregulated Bulk - Regulated
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State-of-the-art manufacturing facilities
API plant, Alathur
API plant, Aurangabad
Non-sterile API plant, Alathur
Sterile API plant, Alathur
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State-of-the-art manufacturing facilities
Betalactam Formulations Plant, Irungattukottai
Ceph Formulations facility, Irungattukottai
Betalactam API Facility, Aurangabad
Non-antibiotic API Plant, Aurangabad
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Orchids business model

• Orchids business is global
• API
• Formulations
• Orchid has strong growth drivers
• Niche generics (cephs, betalactams penems)
• Increasing presence in regulated markets (US
  Europe)
• Drug discovery and drug delivery research
• Orchid has end-to-end execution capability
• API
• Formulations
• Research

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Orchids niche generics model
2010-11
2005-06
2006-07
2007-08
2008-09
2009-10
Cephalosporins
Betalactams
Carbapenems
Non-antibiotics
A carefully developed niche therapeutic strategy
would drive growth, year over year, with
step-function increases in turnover and
profitability
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Orchids generics market opportunity 2005-2010
based on current retail market sizes in USD
Million

• Key success factors for Orchid
• Broad-based presence in all key markets
• Full-spectrum product coverage with blockbuster
  and niche products
• Calibrated entry in line with patent expiries
• Robust distribution arrangements with reputed
  partners
• Proven technical, managerial capabilities

Relatively exclusive position in the antibiotic
space, with few competitors
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Orchid has a unique position in the antibiotic
generics space

• The cephalosporin,high-end betalactam and
  carbapenem generics space, where Orchid
  specializes, has less number of players and is
  relatively insulated from price pressures
• Manufacture requires dedicated, non-switchable
  facilities
• High technology and investment requirements
  present significant entry barriers
• Orchid has the widest product range and the most
  comprehensive US FDA approved facilities and a
  core competence in sterile injectable products

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Key products offer major opportunity in the US
during 2005-08
Veterinary product yet to be genericised
Orchid-Apotex partnership has secured the leading
position in Ceftriaxone generics market in the
US Cefprozil Cefoxitin with Par and Apotex have
been the recent launches
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The positive impact of the various generics
initiatives has resulted in the superior
performance in FY 2006
Rs Mn
Net of ED
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Highlights of FY06 performance

• Impressive increases in turnover and
  profitability, compared to Q3 of FY05
• Turnover up by 38 from Rs 1722.6 mn to Rs 2376.0
  mn
• EBITDA up by 65 from Rs 422.4 mn to Rs 697.6 mn
• PAT up by 403 from Rs 57.6 mn to Rs 289.6 mn
• And in 9 months of FY06 too
• Turnover up by 27 from Rs 5098.9 mn to Rs 6471.8
  mn
• EBITDA up by 57 from Rs 1215.8 mn to Rs 1904.9
  mn
• PAT up by 341 from Rs 144.1 mn to Rs 635.2 mn
• EBITDA margin of 29 reflects an industry leading
  performance (25 in Q3 FY05 and 24 in first 9
  months)
• Performance driven substantially by increases
  from regulated market business which stood at 40
  of Q3 turnover
• Successful launch and quick ramp-up of generic
  Ceftriaxone injection and successful launch of
  Cefprozil Tablets and Suspension have been key
  growth drivers further increases in sales and
  additional launches should keep up the growth
  momentum

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Orchid has also initiated correction of capital
structure with overseas GDR and bond programmes

• Successfully closed in November 2005, a GDR cum
  FCCB issue for USD 75 million with green-shoe of
  USD 2.6 million GDRs and USD 5 million FCCBs
• To retain promoter shareholding, warrants,
  convertible to shares, have been issued to
  promoters / promoter groups as per SEBI rules
• GDR / Bond proceeds have been utilised to pare
  down debt (long term and short term) by USD 59
  million (from USD 282 million, pre-issue)
• Companys debt-equity ratio has improved from 2.8
  (pre-issue) to 1.8 (post-issue) will improve
  further to 1.21 if FCCBs are converted later
• Balance proceeds (less issue expenses) set apart
  for accelerating the NPNC ANDA programmes and
  value-adding formulations facilities in the
  futuristic carbapenems space, apart from normal
  capex

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Shareholding Pattern
As of March 01, 2006
Shares listed on NSE, BSE and MSE
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The Drug Discovery Opportunity

• Global pharmaceutical players are keen on
  strengthening their NCE pipeline in alliance with
  niche drug discovery firms
• high cost and long lead time of in-house MNC
  efforts
• shrinking pipeline
• growing pressure from generics, dictating need
  for more innovative drugs
• Apart from new molecules, potential exists for
• supply of pre-clinical and clinical quantities
• pre-clinical evaluation of new leads
• custom synthesis of select structures /
  processes, and
• co-development
• All this presents a major opportunity for Orchid

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Orchids RD infrastructure
New Drug Discovery Centre, Sholinganallur
Pharma RD Centre, Irungattukottai
RD Centre (Process Biotech), Sholinganallur
Pre-clinical facility, Sholinganallur
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Orchids RD Key Statistics

• Engaged in complete spectrum of pharmaceutical
  RD from drug discovery to drug delivery
• USD 35 million invested from inception on RD
• Current spend at 6 to 7 of turnover, one of the
  highest in the industry
• Over 100 molecules developed in-house for generic
  medicines
• Over 330 patent applications filed with US PTO,
  PCT, European and Indian PTOs 116 published and
  38 granted 30 of the patent applications are
  for new drugs and new drug delivery systems
• Over 300 scientific personnel, covering the
  entire spectrum of RD
• 36 laboratories, over two campuses of 12 acres in
  Chennai

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Drug discovery capabilities
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Pharma research capabilities

• Undertakes formulation development of all types
  of dosage forms for global markets
• 24 ANDAs filed with US FDA 11 approved already
  several more in submission and approval
  pipelines
• Platform technologies patented for novel drug
  delivery
• Sustained / extended release and controlled
  release technologies deployed
• Provides pre-formulation and formulation support
  to drug discovery

Pharma Research
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Target and mechanism based discovery

• Anti-cancer
• Anti-inflammation
• Anti-infective

• Metabolic disorder therapies
• Diabetes
• Obesity
• Auto-immune diseases

Clinical
Pre-clinical
Discovery

• BLX-1002 in anti-diabetes area in Phase II trials

• Eight leads in
• anti-cancer area
• Four leads in Arthritis, IBD Psoriasis
  therapies
• Several leads in diabetes and other areas

• Thousands of compounds designed
• Hundreds synthesised
• Several hits obtained

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About BLX-1002, novel anti-diabetes molecule

• Novel orally active small molecule, developed by
  our US drug discovery JV, Bexel Pharmaceuticals
  (now a 74 Orchid subsidiary)
• Successfully completed human clinical (safety,
  tolerability proof of efficacy) studies in
  Europe
• Distinctive mode of action, compared to the
  latest series of anti-diabetes drugs
• Glucose reduction as well as lipid lowering and
  hypertension control
• No change in liver enzymes and no weight gain,
  two critical issues with other anti-diabetes
  drugs
• Current strategy is to out-license the molecule

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Orchids Mission 2010 is to.
Become a USD 1 Billion Company by 2010-11

• Mission 2010 is well supported by
• Multiple business drivers
• Specific product-market plans
• Robust distribution arrangements
• Infrastructural assets
• Organisational competencies
• Selective new initiatives
• Clear regulatory road map, spanning all the above

Turnover in USD Mn
1000
160
2010-11 (E)
2007-08 (E)
2004-05 (A)
2005-06 (E)
Not to scale
A - Actuals E - Estimates
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Overview of Orchids generics contracts
Additional individual filings for Mexico,
Canada and Europe (not quantified here) are
required,as the case may be
Not for distribution
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Highlights of Orchids distribution contracts

• All ANDAs are developed and owned by Orchid
• Manufactured from Orchids state-of-the-art
  generics plant at Irungattukottai, with API from
  Orchids modern API plants at Alathur and
  Aurangabad
• Supplies will be made by Orchid under a profit
  share arrangement, after netting-off transfer
  price and marketing costs
• Exclusivity subject to mutual performance
• Development plan and funding based on sign-up and
  achievement of certain regulatory / launch
  milestones
• Long-term horizon of partnership, with provision
  for renewal and potential to add further products

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New initiatives - NPNC regulated generics
strategy

• Master list of over 87 NPNC molecules drawn up
  covering diverse therapeutic groups (CVS, CNS,
  ADD, Urology, Osteo etc)
• The above molecules address a current and peak
  retail opportunity of US 85 billion and US 191
  billion in the US EU.
• Supply agreements have been executed with 3
  prominent players viz Alpharma/Actavis, Stada
  Par in the US EU generic space
• The agreements cover 20 molecules that address a
  current retail opportunity of USD 25 Billion.
• Would diversify therapeutic portfolio and provide
  continuous product pipeline
• Some of the molecules would provide Para-IV /
  first-to-file opportunities
• New RD labs and API and Formulations
  manufacturing facilities for NPNC commissioned. 2
  DMFs 1 ANDA already filed in the NPNC space.
  Further filings underway with an aggressive
  target of 2 ANDAs per month

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New initiatives - CRAMS

• Leveraging world-class RD base, Custom Research
  and Manufacturing Services (CRAMS) taken up as a
  new initiative
• GLP certification of Orchids RD Centre by
  National GLP Authority, aligned to OECD
  Principles, is expected to be a major facilitator
  for global tie-ups
• First contract signed with a global pharmaco
  (Pfizer) for supporting NCE development for
  animal health application
• Dialogue initiated with select MNCs for further
  initiatives

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Orchids transition from un-regulated to
regulated markets FY 1995 to FY 2011
FY 1994-95
FY 2004-05
FY 2005-06 (E)
FY 2010-11 (E)
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Orchid offers major competitive advantage for
global pharma through own development as well as
partnerships

• Capabilities and strengths of an integrated
  pharmaceutical major
• A complete in-house, end-to-end connected
  infrastructure, and a complete portfolio of
  products and services covering
• Active pharmaceutical ingredients / Intermediates
• Generic formulations
• Drug discovery
• In the niche, premium Cephs / Sterile Pen. /
  Penems / Oral NPNC space
• Ability to offer the above products and services
  with world-class quality at a cost advantage
• Adherence to principles of client confidentiality
  and intellectual property rights

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Orchid Value Proposition (1/2)

• Fully integrated pharmaceutical corporation, with
  proven technical and managerial capabilities
• State-of-the-art infrastructure for APIs and
  formulations with global regulatory compliance,
  including US FDA
• Multi-therapeutic product portfolio, with a
  unique core competence in niche antibiotics and
  sterile injectables
• Robust business model with execution solidity and
  track record of successful US generics entry and
  ramp-up

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Orchid Value Proposition (2/2)

• Multiple business drivers and sequential product
  roll-outs of premium and niche generics, with
  step-function increases in performance
• US cephalosporin generics from 2005-06
• US betalactam generics from 2007-08
• EU Ceph betalactam generics from 2007-08
• US / EU NPNC generics from 2007-08
• US/ EU penem generics from 2008-09
• Promising drug discovery pipeline covering
  anti-diabetes, anti-obesity, anti-inflammation,
  anti-cancer and anti-infective therapeutic areas
  (not factored in the business projections)
• Attractive PE multiples and low price / cash
  earnings multiples

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THANK YOU