Switzerland's Novartis to Buy German and US Generics Makers

Following intense speculation, Swiss drug maker Novartis AG has announced that it is to acquire Germany's second-largest generics producer, Hexal AG, as well as a 67.7% stake in US generics maker Eon Labs. Novartis will shortly tender for the remaining stake in the US company, and expects the acquisitions to create savings of US$200mn per year. The deal, expected to close in the second half, will secure the company a leading position in the world generics industry, ahead of Israeli producer Teva.

The deal, worth some EUR5.65bn (US$7.38mn), will effectively create the world's largest generic drug maker, following Hexal and Eon's integration into Novartis' generics business Sandoz. The Swiss drugmaker expects some consolidation in the wake of the purchases, and many observers claim that the deal is positive for the company. Taking one example, Novartis could stand to gain substantially in Germany as the government encourages greater generics use in order to reduce costs. Sandoz appears to have underperformed on the local market recently, with last year's sales totalling EUR98mn (US$125.01mn), or about a tenth of market leader Ratiopharm's revenue in 2004.