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ICN GALENIKA 75/25 YUGOSLAVIAN JOINT VENTURE

Executive Summary

ICN GALENIKA 75/25 YUGOSLAVIAN JOINT VENTURE operations began May 1, the firms announced at an April 30 press conference in Washington, D.C. The transaction, which had been in negotiations for the last 18 months, involves all the drug and health care businesses of Belgrade, Yugoslavia-based Galenika, which has assets valued at $ 90 mil., and the investigational drugs, technological and intellectual properties of SPI, a subsidiary of the U.S. firm ICN Pharmaceuticals. Galenika is the largest pharmaceutical company in the Yugoslav pharmaceutical market, with 20% of the country's drug market share, Galenika General Director Velimir Brankovic, PhD, said. "Last year we introduced about 60 new products in the Yugoslav market and other international markets." Galenika's product line includes anti-infectives, antibiotics, analgesics, antirheumatics and cardiovascular drugs. Galenika "had unaudited sales of over $ 200 mil. in 1990," SPI said. In 1989, the company "had audited pretax profit of $ 18.2 mil. on sales of $ 170 mil." In a press release on the venture, SPI classified the agreement as "the largest privatization of industry to take place in Yugoslavia and the largest business transaction since World War II." Galenika, which has 5,500 employees, manufactures and distributes 250 drugs in Yugoslovia, the Soviet Union and throughout Eastern Europe. With the formation of the joint venture, SPI expects to have "annual sales in excess of $ 380 mil.," the release states, more than double the company's current sales. SPI's had sales of $ 141 mil. in 1990 and net income of $ 14.9 mil. SPI's biggest-selling drug in the U.S. is the antiviral drug Virazole, which is approved for the treat of respiratory syncytial virus. ICN Galenika is headed by Galenika's Brankovic. He will serve as president and chief operating officer of the new company. The board will include four directors, three from SPI and one from Galenika. ICN founder Milan Panic was born in Yugoslavia. SPI will pay $ 50 mil. to Galenika and will provide employees of the Yugoslovian company with $ 12 mil. in SPI common stock at the end of three years. Brankovic noted that the stock transaction "means for the first time the workers in Eastern Europe will have shares of a company that is listed in the American Stock Exchange." ICN is joining the growing ranks of drug companies that have gone into business with Eastern European drug firms following the opening of those markets in 1990. Ciba-Geigy recently began a joint venture with Biogal Pharmaceuticals, a 39-year-old company located in Debrecen, Hungary. Ciba holds 51% of the company and Biogal 49%. Ciba-Geigy-Biogal Pharma is scheduled to start operations Sept. 1. Sanofi is in a joint venture with the Hungarian drug firm, Chinoin, which has been described as the second largest pharmaceutical firm in Hungary. In November, Sanofi announced that it was buying 40% of Chinoin ("The Pink Sheet" Nov. 19, T&G-4).
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