Lupin chairman and managing director Desh Bandhu Gupta said,"The tie-up is a major step in Lupin's plans to emerge as a dominant integrated cephalosporins player. This joint venture will help us tap the US $10-billion global cephalosporin market in a cost-effective way."

The joint venture is expected to source its active pharmaceutical ingredients (APIs) from Lupin adding incremental exports worth Rs 500 crore in the first three years. Mova will make and distribute the finished products for CEPH International.

Mova president and chief executive officer (CEO) Joaquin Viso said, "The synergy of strengths of Lupin in manufacture of APIs in US FDAapproved facilities, strong pipeline of products and Mova's strength in dosage technology and marketing of finished products will create an integrated position for the venture."

Viso also said that the newly acquired cephalosporins unit will continue to make certain Eli Lilly products during the transition period of three to four years. "Subsequently, these products will be made at other Lilly facilities and the joint venture will commence production of its own products by the end of 1999," he added.

The new facility, which possesses an US FDA approval for manufacture of oral cephalosporins, has a capacity of 400 tonnes and will employ over 200 people. The 2,30,000 sq ft facility has an estimated replacement cost of over $100 million.

While both partners were silent on the acquisition cost, Gupta said that Lupin's contribution to the deal was funded via a combination of debt and equity. Twenty-five per cent of this is believed to be in the form of equity funding. Lupin has also settled, out of court, apending cefaclor petition with Eli Lilly.

Meanwhile, CEPH plans to undertake contract manufacturing though Viso does not see this activity accounting for more than 20 per cent of the joint venture's turnover after the transition period.

The $90 million Mova Pharma Corporation employs 750 people and undertakes contract manufacturing work for a host of top-notch multinationals like Merck, Novarti, GD Searle. Additionally, Mova markets a range of generic products through Princeton-based Mova Laboratories Inc.

BOX

Stock option plan on the anvil: Lupin Laboratories is believed to have developed a non-infringing process for injectible cephalosporin, cefotaxime, and is on course to seeking a patent for this in the United States.

Lupin's move is significant given that the company's US launch of cefotaxime had been stalled by an overriding patent for the product by Takeda, which had extended the effective protection period to 2013.

Meanwhile, Lupin also proposes to introduce a stock optionplan for its company's permanent employees/working directors as and when the Companies Act permits. The company is seeking shareholder approval at its forthcoming annual general meeting to issue not more than 5 per cent of the post issue capital under the scheme.