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South Africa's largest generic drug company Enaleni Pharmaceuticals is planning to sue Lupin - the Rs 1,200 crore (Rs 12 billion) domestic pharma major - for terminating a marketing right unilaterally in violation of an existing agreement.
The Durban-based Enaleni is now all set to drag the Indian company to court on behelf of Specpharm and Westbury - companies recently acquired by Enaleni.
Specpharm and Westbury had a four-year agreement, which was signed in June 2002, to distribute Lupin's anti-TB drugs in South Africa and other African markets.
However, Lupin had last month announced that it has tied up with Aspen Pharmacare, another South African company, giving Aspen the distribution rights in South Africa and the surrounding markets.
Specpharm and Westbury, which at the end of October become subsidiaries of Enaleni Pharma, is now all set to defend in court their right to distribute Lupin's products in South Africa and other agreed markets. A Lupin source said the company is yet to receive any notice in this regard from Enaleni or its group companies.
"We had intimated Specpharm and Westbury in September about the termination of our marketing agreement with them owing to the change in their management. This is provided in the agreement," said the source. Lupin Chairman D B Gupta was not available for comments.
Informed sources in Lupin said the company has sent the marketing rights termination letter to Specpharm after consultations with legal experts. The company was advised by the experts that the agreement has the provision to be terminated, if the partner company's management changes.
"Since, these companies have been acquired by Enaleni Pharmaceuticals, there is obviously a change of management, which can be anticipated," the source added.
However, a report on South African website Moneyweb has quoted Enaleni director Peter Hulett as saying that the Specpharm/Westbury-Lupin agreement was to have come up for "automatic renewal" had his firms met sales targets and not change management.
"There has been a change of ownership, yes, but right now and into some point in the future, the management will stay exactly the same. Enaleni is bringing on these companies as autonomous business units," the report on Moneyweb quoted Hulett as saying.
In the meanwhile, acting on Specpharm and Westbury's behalf, Hofmeyr Attorneys has sent Lupin a letter notifying the Indian firm it will neither terminate the agreement nor hand over the products to Aspen, as there is no basis to do so, according to Moneyweb.
Enaleni, a contract manufacturer with contracts to Pharma Dynamics, Reckitt-Benckiser and Merck and owning brands including Black Chic, Just for Baby and Healing Handsarct, was the first company in South Africa to receive an investment from the National Empowerment Fund. NEF is usually facilitated through structures such as workers' trusts and put or call options on shares held by the NEF.