Mumbai: Rumours that Orchid Chemicals & Pharmaceuticals Ltd is under takeover threat has fuelled a spurt in its share price. Orchid  shares climbed the most in almost seven years in Mumbai trading after reports that Solrex, owned by the promoters of Ranbaxy Laboratories Ltd, may try to acquire the company.

Solrex Pharmaceuticals Co. increased its stake to 8.06 per cent in Orchid, according to a filing with the National Stock Exchange.

Chennai-based Orchid Chemicals earns most of its revenues (consolidated turnover of Rs 908.5 crore in the first nine months of FY08) from the manufacture and exports of anti-bacterial drug cephalosporins.

It also makes active pharmaceutical ingredients and finished dosage forms for cephalosporins.

The company posted an operating profit of Rs277 crore in FY07.   Orchid's operating profit margin rose 1170 basis points to 28 per cent in FY07 and exports account for about 71 per of sales.

The Rs6,942 crore Ranbaxy has a presence across cardio-vascular, urology and dermatology segments but only a small presence in cephalosporins.

The market for cephalosporins is understood to be growing at over 8 per cent annually in key markets such as the US and Europe. The competition in the space is limited.

Orchid has manufacturing facilities in Tamil Nadu and Maharashtra and a large client base.

Ranbaxy also would be in a position to leverage Orchid's expertise in the anti-bacterial segment where several patents are set to expire in 2009 and 2010 in US and Europe.