JB Chem to invest $5.1m in S African drug company

JB Chemicals & Pharmaceuticals (JBCPL) has signed a definitive agreement to make a strategic investment of $5.1 million (about Rs 23 crore) in a South African generic company "� Biotech Laboratories Pty (Biotech).

The transaction is valued at 1.1 times of Biotech sales of last year.

The transaction, which will be funded through internal accruals "� subject to requisite approvals, is expected to be completed during the first quarter of 2007.

The investment will entitle JBCPL to own a significant minority stake of the issued capital in Biotech with an option to increase its holding to about 51 per cent in future.

Biotech is one of the leading generic players in South Africa with a strong presence on the front end. Biotech, which is a black economy empowerment (BEE) company, is very active in retail and institutional sales.

The BEE status gives the company special privileges to participate in government tenders and other institutional sales.

It registered sales of about $9 million last year.

On acquiring a majority stake in Biotech, JBCPL will be able to make a strong foray into the South African generics market. At present, the South African generics market is estimated to be $3.5-4 billion.

JBCPL will be able to use its South African drug regulatory authority MCC-approved facilities in India to manufacture a majority of Biotech's products, and then supply them to the company for the South African markets. Biotech at present does not have any manufacturing facility locally.

JBCPL Director Pranav Mody said the investment in Biotech was a strategic move.

He said, "This investment will result in considerable synergies for both the companies and will allow JBCPL to tap the lucrative high growth South African and other African markets through the launch of its ethical and OTC range of products."

Kamlesh Udani, executive director, said, "We target the South African market for some specific segments. An equity stake in the $9 million Biotech turnover makes a perfect move to tap a good share in that market."

Biotech, ranked 10th in the pharmaceutical market in South Africa, is a fast-growing generic pharma company. JBCPL plans to leverage a significant number of Biotech product dossiers by undertaking the manufacturing of those products through site variation opportunities at its own facilities in India.

It will also be able to exploit the markets of Southern African Developing Countries through Biotech, besides its existing markets.

Biotech CEO Shad Mapetla said the investment by JBCPL in Biotech bridged a very significant gap in the latter's aggressive growth and development strategy, dictated by the company's vision of becoming the top pharmaceutical company in South Africa in a short time.

"Critical to achieving this position is a good pipeline of relevant ethical and OTC products to be supplied by JBCPL," he added.