Costa Mesa Drug Maker, Yugoslav Firm to Merge

SPI Pharmaceuticals said Wednesday it has tentatively agreed to merge with Yugoslavia’s second-largest drug manufacturer in what it said would be the first merger of its kind between U.S. and Eastern European drug companies.

The Costa Mesa-based pharmaceutical company said it had signed a letter of intent to merge with Galenika, a Belgrade-based firm with 5,800 employees and annual sales of about $150 million.

The proposed merger would create an international drug company with close to 7,500 employees and nearly $300 million in sales.

Jack Sholl, an SPI spokesman, said his company would benefit from the proposed merger by gaining direct access to consumer markets in Eastern Europe and the Soviet Union.

“This proposed agreement symbolizes the new opportunities that have been created by the changing political climate in Eastern Europe,” SPI Chairman Milan Panic said.

Terms of the proposed agreement were not disclosed.

Sholl said the deal is subject to approval of both companies’ boards of directors as well as the government of Yugoslavia.

Galenika manufactures and sells a wide range of pharmaceuticals. The company’s products are sold throughout Eastern and Western Europe, Africa and the Middle East.

SPI is a prescription and non-prescription pharmaceutical company with $124 million in sales annually and about 1,600 employees worldwide. About 89% of SPI’s stock is owned by ICN Pharmaceuticals, a Costa Mesa-based drug company.

SPI has recently seen an increase in international sales, especially in Mexico and Central America. The company has also benefited in those areas from increased demand for injectable multivitamins and antibiotics. SPI does not have approval to sell those drugs in the United States.

Boosted by strong international sales, SPI recently posted a 26% jump in its earnings for fiscal 1989. The company earned a record $12.9 million for the year ended Nov. 31, contrasted with $10.2 million in fiscal 1988.

SPI’s shares closed unchanged Wednesday at $9.125 per share on the American Stock Exchange.