Jubilant to buy Draxis in $255m deal

Bringing Draxis into the Jubilant fold will give the Indian company a strong position in the North American contract manufacturing market, especially in the area of small volume parenteral drugs which is a big focus for Jubilant in the wake of its $122.5m purchase of Hollister-Stier sterile injectables last year. The latest deal takes Jubilant into the top five sterile manufacturing concerns in North America, according to Jubilant's chairman and managing director, Shyam Bhartia. Draxis also adds to Jubilant's capacity in non-sterile products, such as solid oral and semi-solid dosage forms, which boasts a long-term contract with healthcare giant Johnson & Johnson. Crucially, Jubilant also gains capability in the fast-growing and high-margin radiopharmaceutical business, via Draxis' Draximage unit. Draximage is 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 radiopharmaceutical used to evaluate blood flow in patients undergoing cardiac function tests. Cardiolite was originated by Bristol-Myers Squibb but, faced with the patent expiry on the top-selling product on 29 July in the US, BMS opted to sell off its entire medical imaging business to Avista Capital Partners for around $525m in January. Sales of the brandname version reached more than $360m in 2006 but are expected to tail off rapidly once generic rivals reach the market. The generics market has been the mainstay of the Indian pharmaceutical manufacturing industry for years, but increasing competition and a downturn in growth rates has led to overcapacity. Jubilant is one among several Indian companies that have opted to expand their portfolios to cope with the changing operating environment. Jubilant's approach has been expansion via a string of acquisitions allowing it to offer services spanning form drug discovery and development through to manufacturing. For example, it was the first ever Indian company to buy US contract research organization when it announced the acquisition of Target Research Associates in 2005, and has also added a majority stake in Belgium's Pharmaceutical Services Inc and US generic company Trigen Laboratories in recent years. There had been talk for some time of an acquisition in Europe, but in the end a deal in North America seems to have won out. Last November the company said it had set up a $100m fund for acquisitions: the current deal is for around that amount in cash, with $155m raised in debt, said Bhartia. The purchase price of $6 per share represents a 22.4 per cent premium over Friday's closing price of Draxis' shares on NASDAQ. The offer has been approved by Draxis' board, but still has to pass shareholder and antitrust approvals. If all goes according to plan it should close in the second quarter of this year, according to Jubilant.