Orchid Chemicals & Pharmaceuticals isn't so different from the average American with lots of credit card debt. A big chunk of its income is earmarked to pay bills. The Indian drugmaker says it plans to pay off debt with the $400 million proceeds from the sale of its generic injectable drugs business to Hospira.
CEO Raghavendra Rao told Bloomberg that Orchid will retire $260 million in long-term debt with the sale proceeds, once the deal closes next quarter. It'll have to set aside $20 million for taxes, leaving another $120 million for working capital and for expansion of its remaining pharmaceuticals business.
But will that expansion be enough? Investors bid down the stock on worries about Orchid's growth prospects. Analysts said the injectables business was expected to be the company's growth engine over the next several years. So what exactly will take its place revenue-wise? We'll have to wait and see what Rao does with his stash of cash.