COSTA MESA — SPI Pharmaceuticals Inc.'s foray into Eastern Europe begins today as it takes control of Yugoslavia's leading drug manufacturer, Galenika Pharmaceuticals Inc.
The new subsidiary, called ICN Galenika, is a joint venture with SPI owning 75% and Galenika, a state-owned company with a smattering of other small industrial ventures, retaining a 25% interest. Three of the company's four directors will come from SPI, while Dr. Velimir Brankovic, general director of Galenika, will stay on as president and chief operating officer.
SPI, a subsidiary of ICN Pharmaceuticals in Costa Mesa, announced the Galenika deal last November. Now that negotiations are complete and joint operations are beginning, SPI will invest $50 million in Galenika's manufacturing plants and transfer its technology to the new subsidiary over the next few months, the company said Tuesday.
As part of the deal, 5,500 Galenika employees will receive $12 million in SPI common stock in three years, an unusual arrangement that made the purchase of a state-owned company by a foreign corporation more palatable to the Yugoslavs.
"This is the first time workers in Eastern Europe will hold shares in a company listed on a major stock exchange," said ICN Galenika's Brankovic in a news release. "This stock distribution is being made to foster capitalism in Yugoslavia."
ICN Chairman and Chief Executive Milan Panic, a native of Yugoslavia, called the venture "a major step in the transformation of Yugoslavia to a free market economic system."
Galenika has nine plants in six Yugoslavian cities, manufactures about 250 prescription drugs for distribution primarily in Eastern Europe, and in 1990 had estimated sales of $230 million.
SPI manufactures and distributes about 300 drugs in 60 countries, with principal operations in North and South America, Western Europe and the Middle East. The company's largest U.S. product is the antiviral drug Virazole, used primarily to treat respiratory tract diseases.
SPI has five plants in Ohio, Mexico, Canada, Spain and the Netherlands, and 1990 sales totaled $141 million.
"This acquisition opens access to Eastern European markets for SPI and increases Galenika's access to Western pharmaceutical markets through SPI's marketing and distribution infrastructure," Panic said.