The joint venture, Astrix Laboratories, is an Indian-based producer of anti-retroviral APIs. It was established as a 50:50 JV between Matrix and Aspen, a South African pharmaceutical company that ranks as AfricaÆs largest medical drug manufacturer. Aspen is also Astrix's main customer.
Matrix and Aspen decided last year to unwind the JV and the intention was that Matrix would buy Aspen's entire 50% stake. However, as per yesterday's announcement, Mylan will now buy a 49% stake in the JV through a subsidiary, while Matrix will purchase the remaining 1%. This will leave Matrix with 51% of Astrix, while Matrix's immediate parent company, MP Laboratories (Mauritius), will own 49%.
Matrix has agreed to buy the Astrix shares from its parent at fair market value within two years after closing of the deal. Aspen will retain an interest in Astrix through a Class B share.
As part of the agreement between Matrix and Aspen, another joint venture between the two has also been unwound û although that was done by Aspen buying out Matrix's stake. That JV, a South African-based company named Fine Chemicals Corp, is also involved in the supply of APIs.
As part of the dissolution of the JVs, Matrix and Aspen have executed long-term agreements for the supply of antiretroviral active ingredients and formulations.
Mylan, the worldÆs third largest generic drugs manufacturer, acquired 71.5% of Matrix in August 2006 in a deal that valued Matrix at $1.03 billion. The deal was structured so that part of the gains realised by Temasek and Newbridge, who had private equity investments in Matrix, were reinvested in Mylan.
In Mylan's most recent earnings call for the third quarter of calendar 2008, the transcript of which is available on www.seekingalpha.com, analysts questioned the impact the investment in Matrix was having on MylanÆs gross margins. Mylan's vice chairman and CEO, Robert Coury, said that it was difficult to quantify gross margin improvement as MatrixÆs positive impact on Mylan was to help its vertical integration, which in turn helps reduce the cost of goods.
ôWhere the real materiality comes in is [MatrixÆs] ability on the commercial side, to be able to bid your products and be able to put products on the market that are going to stay on the shelf,ö says Coury. ôItÆs those commercial dollars. ThatÆs really where Matrix is on a continuing basis enhancing our overall gross margin.ö
Shares of Matrix gained 5.7% on the National Stock Exchange in India yesterday to close at Rs74 ($1.51), as investors welcomed the development and the reduced cash outlay for Matrix. Mylan lost 3.8% on the New York Stock Exchange to close at $10.63 on Wednesday.