SPI Plans Joint Venture With Russian Drug Maker

SPI Pharmaceuticals Inc., continuing its aggressive expansion into Eastern Europe, said Thursday that it has tentatively agreed to form a joint venture with one of Russia’s oldest drug manufacturers.

SPI, which is 70% owned by ICN Pharmaceuticals Inc. in Costa Mesa, did not disclose financial details of its agreement with Oktyabr Pharmaceutical Factories, a St. Petersburg company founded in the year 1714.

The comparative backwardness of the Soviet medical industry has attracted interest among many U.S. companies as political and economic changes have swept that country. In March, seven companies--including Abbott Laboratories, Colgate-Palmolive Co. and Pfizer Inc.--formed a consortium with more than a dozen Soviet parties to set up six joint ventures to produce medical, dental and surgical instruments.

ICN Chairman Milan Panic said the proposed agreement is part of SPI’s planned expansion in Eastern Europe and the Soviet Union.

“The cooperation between our companies will increase the availability of needed pharmaceuticals in Russia and elsewhere in the Soviet Union . . . ,” Panic said. He said SPI would supply prescription and non-prescription drugs such as analgesics, vitamins and anesthetics to the Soviet market, where there are chronic shortages of such drugs.

Leonard Seleznev, general manager of Oktyabr, said his company hopes to gain access to a wider variety of drugs and to expand its export opportunities, particularly to the United States and other Western countries.

Oktyabr, which employs 3,300 at four St. Petersburg plants, was established in 1714 by Emperor Peter I. It sells its products throughout the Soviet Union and Eastern Europe.

The Costa Mesa company, which struck a deal with Yugoslavia’s largest drug maker in November, 1990, cautioned that the new deal involves only a letter of intent with the Russian firm. “This is a proposed transaction and our plan is to proceed further with due diligence,” said Jack Sholl, an SPI spokesman.

Few details of the deal were disclosed, but analysts speculated that the venture would be structured similarly to SPI’s joint venture with Yugoslavia’s Galenika Pharmaceuticals. SPI owns 75% of ICN Galenika, with the Yugoslav firm owning the remainder. ICN Galenika’s sales should reach about $45 million this year, Sholl said.

Boosted by ICN Galenika’s sales, SPI’s third-quarter revenue nearly tripled to $96.8 million from the year-earlier period. Earnings were $8.7 million, up from $3.4 million in the 1990 quarter.

SPI stock closed unchanged Thursday at $27.50 a share, while ICN shares rose 75 cents each to close at $17.

Both SPI’s and ICN’s shares attracted attention on Wall Street early last month when they surged in very heavy trading. In early November, as ICN stock surged, the New York Stock Exchange took the highly unusual step of forbidding brokers to activate automatic sell orders, hoping to prevent a sudden sharp decline in the stock.

Analysts attributed the activity to buy recommendations from several analysts in the fall. SPI’s stock has nearly quadrupled since the beginning of the year.

“Galenika’s sales have come in much stronger than anticipated, and this contributed to a run-up to SPI’s stock price this year,” said Philip Dubuque, a portfolio manager with Invesco Inc., a Denver mutual funds management company.

Joint Venture Partners

SPI Pharmaceuticals Inc. Headquarters: Costa Mesa Founded: 1981 Management: Milan Panic, chairman and chief executive Manufacturing Plants: Eight plants--in Covina; Bryan, Ohio; Mexico City; Montreal; Barcelona; the Hague; Belgrade, Yugoslavia. Products: 600 prescription/non-prescription drugs Markets: Latin America, Europe, Far East Annual sales: $280 million (1991*) * Analysts’ estimate. Employees: 6,100

Oktyabr Pharmaceutical Factories Headquarters: St. Petersburg (formerly Leningrad) Founded: 1714 Management: Leonid Seleznev, general manager Manufacturing Plants: Five plants in St. Petersburg Products: 225 prescription/non-prescription drugs Markets: Soviet Union, Eastern Europe Annual sales: Not available Employees: 3,300