Almost all (99 per cent) of Draxis' shareholders approved the deal, well above the two-thirds threshold level required under Canadian law. Only a couple of hurdles remain, including formal antitrust approval in Canada which is expected tomorrow.
Completion of the $255m deal will give Jubilant a stronger presence in the North American contract manufacturing market, and extend its capacity in some key niche segments, such as in the manufacture of small-volume parenteral drugs and radiopharmaceuticals.
One of the main positives in the deal, according to industry observers, is that Jubilant will get access to Draxis subsidiary Draximage, one of the few companies in the US that has the manufacturing capability to develop and register a generic form of Cardiolite (technetium-99m sestamibi), a widely-used radiopharmaceutical used to evaluate blood flow in patients undergoing cardiac function tests.
In addition, the acquisition takes Jubilant into the top five sterile manufacturing concerns in North America, according to the Indian company's chairman and managing director, Shyam Bhartia.
Jubilant already operates four manufacturing facilities in India and a US Food and Drug Administration-approved plant in Maryland, and the Draxis acquisition brings an additional 247,000 sq ft FDA-registered facility near Montreal.
The acquisition comes after a difficult period for Draxis, which has seen a reduction in demand, production delays and other brakes on its finances drive it into the red in 2007 and Q1 2008.
Contract revenues in the first quarter fell 11 per cent, primarily as a result of lower revenues from sterile products, and margins have also been reduced as sterile products tend to be a more lucrative element of the contract business.
Draxis' biggest contract is to make Genzyme's Hectorol (doxercalciferol), used to reduce elevated intact parathyroid hormone (iPTH) levels in the treatment of secondary hyperparathyroidism in patients undergoing chronic renal dialysis. Draxis' revenues have also been pegged back by lower sales of Hectorol, though it expects a recovery for the product in the latter half of 2008.
The Canadian firm is also set to benefit from the roll-out of a contract to make non-sterile products for Johnson & Johnson Consumer Health, which is set to add $120m of revenues over five years, starting in 2009, and take capacity utilisation at the firm's non-sterile facilities to more than 85 per cent.
Product transfer activities are ongoing and are expected to increase throughout 2008, while construction of a new secondary packaging facility associated with this contract is set for completion during the second half of this year.
