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JB Chemicals to focus on contract manufacturing

JB Chemicals to focus on contract manufacturing
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First Published: Wed, May 25 2011. 05 10 PM IST
Updated: Wed, May 25 2011. 05 10 PM IST
Mumbai: JB Chemicals and Pharmaceuticals plans to focus on its contract research and manufacturing (CRAMS) business to build its position in the sector that is expected to see rapid growth, a senior official said, after the Indian drugmaker sold its over-the-counter brands in Russia.
It would also launch at least 15 new products from its newly formed gynaecology and dental division in India this year, President Pranabh Mody told a conference call on Wednesday.
On Tuesday, Johnson & Johnson agreed to buy Rinza, Russia’s leading multi-symptom cough and cold brand, and Doktor Mom, Russia’s No. 2 cough brand, from JB Chemicals for $260 million.
“We will have a huge cash on the balance sheet and it would take some time for us to decide on future course of action.” Mody said, adding, “We will use the proceeds of this deal to grow in pharma space.”
“We will further concentrate and strengthen our position in the contract manufacturing segment.”
The CRAMS segment in India has seen a sluggish annual growth of about 7 to 10% over the last three years, compared with the overall industry growth rate of about 15%.
The segment is set for a revival over the next 18 months as global pharma players are fast increasing their spend on outsourcing, analysts say .
The deal between JB Chemicals and Johnson & Johnson is the second largest deal in the last six months in the OTC space between a global and an Indian firm.
Last December, British firm Reckitt Benckiser bought privately held Indian company Paras Pharmaceuticals for about $726 million to cash on the Indian firm’s OTC and personal care products business.
However, investors gave a thumbs down to the JB Chemicals deal on Tuesday, sending its shares down as much as 17.8% on concerns the sale might not prove healthy for its revenue growth, several traders said.
JB Chemicals, which had spent $15 million in television advertisement in Russia and CIS in the fiscal year ended March, was not in favour of investing more in the brands, Mody said.
Of the $90 million sales in Russia and Commonwealth of Independent States (CIS), it sold business worth about $67 million, while the remainder continues to be with it, Mody added.
“Taking OTC business in Russia to the next level would have required significant advertising investment. Also, the collection period in this business was 6-8 months, which made us take this decision,” Mody said.
The company expects to receive the sale proceeds in about 60 days and would then consider some “pay-out” for its shareholders.
On Wednesday, its shares, valued at $235.86 million, ended down 0.12% in a weak Mumbai market.
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First Published: Wed, May 25 2011. 05 10 PM IST