Hyderabad, Sept 10: As part of a revival package to be submitted to the BIFR, the ailing SOL Pharmaceuticals (SOL) has proposed to hive off its formulations business to $1.5-billion Israeli pharma major, TEVA Pharmaceutical Industries. The Israeli firm manufactures bulk drugs and formulations, with plants across the globe.TEVA has decided to promote a joint-venture company with SOL, to which the formulation business will be hived off. But this will be after approval from banks and financial institutions, according to company sources. Through the hive-off scheme, SOL is expected to receive about $7.5 million, the source added.
TEVA, being a major importer of bulk drugs and intermediates from the country, which accounts for about Rs 250 crore per annum. SOL had earlier entered into supply agreements with the Israeli drug company and obtained interest-free advance of $2.5 million against sulphamethaxazole supplies in April 1997.
It is understood that the joint-venture company is expected to produce theproducts exclusively as required by TEVA and also procure the required bulk-drug raw material supplies through the proposed company. Further, the joint-venture firm will be accorded "preferred supplier" status by TEVA. According to a company estimate, the new company could make an initial turnover of Rs 100 crore.
Earlier, SOL had been reported to the BIFR during 1997 since over 50 per cent of its net worth was wiped out. For the fiscal ending March 1998, SOL's net worth is nil, with accumulated losses amounting to Rs 166.52 crore.
For the six-month period ending March 1998, SOL has incurred a loss of Rs 99.50 lakh on sales of Rs 14.36 crore. The company's net worth as on 31st March 1998 is reported at Rs 102.20 crore. According to a report, the SOL management had put in efforts to improve the company's affairs. It had initiated a re-engineering process:
Mobilised Rs 32 crore under Alday cash-bonds scheme and used the funds to regularise bank accounts; To meet working-capital requirements,it had obtained a foreign-currency loan of Rs 10 crore from IDBI during 1996-97; It had raised Rs 17 crore after selling two of its successful brands--Riflux and Clamp--during 1997 and liquidated high-cost private borrowings; An interest-free advance of Rs 10 crore from TEVA Pharmaceuticals Industries, which was retained by the banks to regularise the overdrawn accounts;The company's strategic decision to license the registered formulation brands to other manufacturers for marketing did not yield anticipated results. The non-availability of medicines in the market led to the down-fall of the company's brand image. This resulted in a reduction of prescriptions of the licensed drugs, said the company report.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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