Matrix Laboratories has entered into a Share Purchase Agreement (SPA) with the promoters of Mchem group, China for the acquisition of controlling stake of about 60% in the Mchem group.

The closing of the transaction is expected to be completed before end December 2005 and is subject to fulfillment of certain conditions/formalities and obtaining requisite approvals from the regulatory authorities.

The share purchase agreement is in line with the strategic intent and the memorandum of understanding that the company had signed earlier with Mchem to gain access to the comparative advantage that China provides in the sourcing of pharmaceutical chemicals & intermediates, and to establish a cost effective supply chain.

The acquisition of substantial stake in Mchem group will help Matrix to backward integrate into China for manufacture of intermediates and will help consolidate its position as a major supplier of Active Pharmaceutical Ingredients (APIs), particularly Anti-retrovirals (ARVs), worldwide.

This will also provide access to Matrix, through Mchem, into Chinese pharmaceutical market, which is growing at a rapid pace. Going by the latest reports on HIV/AIDS infections worldwide, the demand for ARVs is also expected to grow considerably in China over the next few years.

Based in Xiamen, on the East coast of China, Mchem group manufactures pharmaceutical products ranging from basic chemicals, intermediates, active pharmaceutical ingredients and finished dosage forms with a group turnover of about US $ 35 Million. Mchem also has 40 finished dosage forms registrations approved for manufacture/supply in China.

Mchem group is engaged in the manufacture of HIV/AIDS medicines for more than five years and also supplies to state-owned companies in certain Asian countries.

Mchem group recently signed an agreement with the President Clinton Foundation making it the only Chinese company supplying intermediates, APIs to Foundation Partners besides supplying finished dosage forms to Chinese Government sponsored HIV programme.

"The acquisition of substantial stake in Mchem group is a strategic step towards strengthening our supply chain and to establish as a cost effective manufacturer. With absolutely no overlap of products, customers and markets, Matrix would further strengthen their presence in the global markets," said Mr. N. Prasad, the Executive Chairman of Matrix Laboratories.

"We are happy and proud to be associated with Matrix Laboratories. Mchem group is looking forward to work with Matrix in its strategic pursuit and our combined strengths is expected to deliver the best performance. Mchem group would continue to be associated with the existing business partners in the areas of manufacturing and distribution," said Mr. Mark Gao, the Chairman of Mchem group.

About Matrix Laboratories:

Matrix Laboratories Limited is a public limited company listed on BSE and NSE, and is engaged in the manufacture of Active Pharmaceutical Ingredients (APIs) and Solid Oral Dosage Forms. Matrix is one of the fastest growing API manufacturers in India and focuses on regulated markets such as US and EU. The company has a wide range of products in CNS, anti-bacterial, anti-AIDS, anti-asthmatic, cardiovascular, gastro intestinal, anti-fungal, pain management and life style related therapeutic segments. Four manufacturing facilities of the company are approved by the US FDA. The combined FDA approved capacity is one of the largest in the country. The company's Finished Dosage Forms (FDF) manufacturing facility has a capacity to manufacture 2 billion tablets, 300 million capsules on two- shift basis.

With about 2000 employees, including 280 R&D scientists, Matrix focuses on developing APIs with non-infringing processes to associate with generic players in regulated markets for their early formulation entry.

Matrix reported a profit after tax (PAT) of US $ 30 million on sales of US $ 146 million for the financial year ended March 31, 2005. It has recently acquired controlling stake in Docpharma, Belgium, for a front-end presence in Southern Europe. Newbridge Capital/TPG Ventures, US, and Temasek Holdings, Singapore, are the strategic investors in Matrix with combined holding of about 40%.