Subject to approval from shareholders and the Indian High Court, the move allows the two newly-formed companies to concentrate on their respective areas of expertise. APL’s business interests include generics, domestic formulations and international active pharmaceutical ingredients (API).
Meanwhile, Alembic Pharma will stay at its Vadodara-based site, using its fermentation facilities to manufacture Penicillin G & Erythromycin Thiocyanate and a variety of other products.
Alembic Pharma has a number manufacturing plants to compliment the one in Vadodara. Its additional sites in Gujarat and Himachal Pradesh, manufactures formulations for the domestic and other export market.
Under the terms of the demerger, existing shareholders of Alembic be offered one additional share for every one they currently own in Alembic. One equity share is currently worth Rs 2.
Alembic said the process of demerging would take approximately seven to nine months with the formally appointed date of de-merger set as April 1, 2011.
Talking to India’s Economic Times, finance director, RK Baheti outlined the main reason behind the demerger as an attempt to help insulate core pharma operation from the severe volatility and uncertainty of Penicillin-G business.
The business has suffered greatly in recent times from fluctuations in raw material prices and a rise in competition from companies from China. The Penicillin-G facility does not have approval from the US Food and Drug Administration (FDA).
Previous financials released prior to re-organisation saw Alembic post revenues of Rs 1,142.44 crore for the full financial year 2009-10, along with a profit before tax of Rs 43.81 crore. The company had accrued a total debt of Rs 408 crore.
Post re-organisation, Alembic revealed FY2009-10 income of Rs 114.96 crore, while Alembic Pharma posted revenues of Rs 1,027.48 crore for the period. A significant portion of debt showed up on Alembic Pharma balance sheet at Rs 339.25 crore, while Alembic displayed a reduced debt of Rs 69.12 crore.
Alembic is not the first to suffer from a hit to its penicillin production line. Manufacturers such as Max-GB and HAL ceased their Penicillin-G production as far back as 2002-03 with JK Pharmachem and TGBL following close behind in 2004-05.
Alembic Pharma had originally closed down its manufacturing of penicillin only to resume production at a later date.
Alembic Pharma, established in 1907, develops, manufactures and markets pharmaceutical products, pharmaceutical substances and intermediates. It is considered the market leader in the anti-infective drugs in India, particularly the Macrolides segment.