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Claris forges infusion drugs JV with Otsuka, Mitsui

Friday, 7 December 2012 - 10:27pm IST | Place: Bangalore

The intravenous solutions business currently accounts for 55% of Claris's Rs 740 crore turnover.

After weeks of speculation, Ahmedabad-based Claris Lifesciences finally inked a deal with two Japanese firms Otsuka Pharma and Mitsui to set up a joint venture (JV) for its medical infusion drugs business in India and emerging markets.

The intravenous solutions business currently accounts for 55% of Claris's Rs 740 crore turnover.

In the JV, to be called Claris-Otsuka which will employ 700 staff, Claris will hold a 20% stake, Otsuka 60% and Mitsui 20%.

In other words, Claris will offload 80% of its stake in its existing infusions business (which is valued at Rs 1, 313 crore) and receive Rs 1,050 crore.

But before that, Claris will transfer the infusion business to a wholly owned subsidiary through a slump sale.

The subsidiary thus formed will morph into Claris-Otsuka which will make anti-infectives, plasma products, common solutions and nutrition therapies. Claris will transfer two of its five manufacturing units to the JV.

The new venture will introduce Otsuka's products in India while the Japanese company will be able to use the venture's units and supply chain for its global business.

Arjun Handa, MD and CEO of Claris said the infusions business is growing well in India and the emerging markets. \"It needs a broad product portfolio, long-term investments and technical and global expertise which will be achieved by the entry of Otsuka and Mitsui.\"

Analysts see the proposed JV as a better option than outright sell-off.

\"Since Claris will get a 20% stake in the new JV, it can use the proceeds to fuel its existing business,\" said an analyst from a brokerage.

The company's statement said as much: \"Subject to board's and shareholders' approval, Claris plans to utilise the cash to fuel its existing business growth, deleverage and reward shareholders.\"

In other words, Claris plans to focus entirely on its injectables business by bringing more products in this segment.

Handa said, \"Claris has always had niche positioning within the injectables domain and this transaction will further help build on this segment.\"

The proposed JV is viewed as a positive from another perspective as well. Claris has been facing US regulator FDA's wrath since two years. The latter first issued a warning and then banned Claris's products due to quality issues.

Moreover, a deal Claris had sealed with US major Pfizer in 2009 to gain access to markets in North America, Europe and Australia for its injectables products, had also ended prematurely in August this year.

Friday's deal for a new JV will likely put those two negatives behind, observers said.

But shares in Claris closed 3.75% down at Rs 264.55 on the BSE. Some traders said the stock had already soared in the run-up to the JV announcement. "Given that Claris is selling its very profitable business, the market's negative reaction was to be expected," said an analyst.

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