Novartis to Acquire Two Generic Firms, Top Spot in Generics Market

Novartis has agreed to purchase German generic drugmaker Hexal AG and U.S. generic company Eon Labs -- acquisitions that will make it the largest generic drug company in the world, the company said.

Under the terms of the deals, Novartis will pay approximately $8.3 billion in cash for the two companies, which will be integrated into Novartis' Sandoz unit. The combined company, which will maintain the Sandoz name, will have combined pro forma 2004 sales of roughly $5.1 billion, pushing it ahead of current market leader Teva Pharmaceutical. Jerusalem-based Teva had net sales of approximately $4.8 billion in 2004.

Novartis plans to buy all of unlisted Hexal and approximately two-thirds of Eon for a total of $7.38 billion in cash. The company will also spend roughly $1 billion to acquire the remaining third of Eon's stock not held by Santo Holding, Eon's controlling stockholder. Novartis said the deals are expected to close in the second half of 2005.

Once the acquisitions are complete, Sandoz will have a portfolio of more than 600 active ingredients in more than 5,000 dosage forms and more than 20,000 employees, Novartis said. The company anticipates annual cost synergies of $200 million within three years after closing, with 50 percent occurring in the first 18 months.