German chemicals major Bayer AG and the Ahmedabad-based Zydus group have finally decided to terminate plans for a 51:49 pharmaceutical joint venture in India. This ends six months of speculation in the midst of which both prospective partners denied the possibility of a break-up.
A joint statement issued by both companies says that, after intense discussions, they came to the conclusion that their mutual interests would be better served by not entering into a marketing joint venture. "Other options for co-operation are under evaluation. Both groups are continuing to explore possibilities for cooperation in the life sciences segment," the release added.
Bayer had signed a memorandum of understanding with Zydus in July 1998 to create a 51:49 joint venture company with a total investment of about Rs 20 crore, including an initial equity of Rs 16.2 crore. As per the MoU, Bayer India was to transfer all of its 13 pharmaceutical brands, valued at Rs 40-45 crore, and marketing operations, including a field-force of 275 personnel, to the new company. Brands of equal value were also supposed to be brought in from the Zydus group.
Zydus managing director Pankaj Patel says that other options, such as co-marketing, joint product development or sourcing, could be explored in future, and that might make more sense than adding needless infrastructure through a separate joint venture.
Meanwhile, Zydus has bagged the rights for clonazac sodium, the second product from its joint venture partner Byk Gulden. Byk Gulden will also source $ 5 million worth of anti-arthritis bulk lonazolac calcium from Zydus this year. The company is also transferring the assets of its Mumbai facility (Indon unit) to the Byk Gulden joint venture, say company sources.
Zydus is also negotiating with Argentine company Biosidus for licensing of granulocyte monocyte colony stimulating factor product.
This decision to split has brought a fair amount of uncertainty on Bayer India's plans for the restructuring of its pharmaceuticals business to "assure a non-loss situation" to its shareholders. In May 1998, Bayer had begun restructuring its pharmaceuticals business.
The company had decided to freeze further investments in pharmaceutical sales and marketing. According to Alan McGilvray, managing director, Bayer India, the company is planning to launch new products in India for cardiac ailments, infections, cancer and diabetes.
However, it remains to be seen whether Bayer will rope in a new partner to market its existing as well as new products or whether it will run its pharmaceuticals business through its 51 per cent subsidiary Bayer India. No official confirmation could be got.