Orchid closing up shop in China

In a move that flies in the face of the trend of drugmakers flocking to China, Indian API maker Orchid Chemicals & Pharmaceuticals is selling its joint venture interest there and retreating back to India.

The company said in an announcement it would sell for $13.9 million its 50% stake in a 10-year JV with North China Pharmaceutical. In 2002, the companies built a cephalosporin API manufacturing plant in Shijiazhuang, China.

Orchid Chairman K. Raghavendra Rao told Business Standard, "With the local Chinese players fast integrating, the operating conditions have grown quite competitive in China. Moreover, the products that the JV manufactures and markets in the local Chinese market have reached a mature stage resulting in flat growth prospects going forward. Hence, it was a prudent decision to relinquish our stake to the partner and exit the JV."

The decision comes, the Business Standard reports, as the company reported a third-quarter loss of about $4.3 million after reporting a profit in the quarter a year earlier. Orchid says it is consolidating its operations in its home country. But even there, it has sold off some assets. In August, Orchid agreed to sell an FDA-approved API plant in Aurangabad, India, to Hospira ($HSP) for $200 million. That deal also includes an API research and development operation in Chennai, which employs 190.

While drugmakers are building finishing pharmaceutical operations in China to tap that market, some API and ingredient makers are finding rising costs too much for their thin margins.

- here's the announcement
- get more from the Business Standard