SPI Completes Merger With Yugoslavian Drug Maker

SPI Pharmaceuticals Inc. of Costa Mesa has completed its merger with Yugoslavia’s largest drug and chemical manufacturer and will form a new company that will have expected annual sales of $370 million.

Under the agreement announced Thursday, the assets of Belgrade-based Galenika Pharmaceuticals would be transferred to a new joint venture company, ICN Galenika Inc., to be based in Costa Mesa. SPI will own 75% of the new company and Galenika Pharmaceuticals will own the remaining 25%, SPI officials said.

The deal, originally announced in February, is one of the biggest East-West transactions in Yugoslavia since the end of World War II, SPI officials said.

The deal will provide Galenika with capital needed to modernize equipment and improve its international marketing position, while helping the U.S. drug maker to expand into Galenika’s traditional markets in Eastern Europe and the Soviet Union.

SPI, which is 89% owned by ICN Pharmaceuticals Inc. in Costa Mesa, is also investing in experimental new drugs that will be developed at Galenika’s research institute. SPI hopes to save on product research and development expenses because labor costs are relatively inexpensive in Yugoslavia.

“This will open the two pharmaceutical markets of Eastern Europe and the United States to sell each other’s various products,” said John Giordani, ICN’s chief financial officer.

SPI makes about 300 pharmaceutical products and has nine manufacturing and distribution facilities in North and South America, Western Europe and the Middle East. The company expects to report sales of $140 million in 1990 and employs 1,600 people.

The government-owned Galenika, with 5,800 employees, will do an estimated $230 million in sales in 1990. It manufactures a variety of drugs that are sold primarily in Eastern Europe and the Soviet Union but also in Africa, the Far East and some Western countries.

The merged firm will have 7,400 employees, 18 manufacturing plants and distribution facilities in both countries and assets of approximately $245 million, SPI said. Altogether, the venture will manufacture and market about 600 prescription pharmaceuticals.

“Part of the plan for the joint venture would be to trade . . . our expertise and personnel,” Giordani said.

The agreement calls for SPI to invest $50 million in cash, in addition to unspecified properties, equipment and other technical and intellectual properties in Costa Mesa, for a total of $360 million. Jack Sholl, an ICN spokesman, said SPI will borrow the $50 million.