Healthy Skepticism Library item: 821
Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.
Publication type: news
Faunce T.
Novartis hits acquisition trail
2005 Feb 22
Full text:
Swiss drugmaker Novartis has announced 5.65bn euros ($7.4bn; £3.9bn) of purchases to make its Sandoz unit the world’s biggest generic drug producer.
Novartis, which last month forecast record sales for 2005, said it had bought all of Germany’s Hexal.
It also acquired 67.7% of Hexal’s US affiliate Eon Labs, and offered to buy the remaining shares for $31 each.
Novartis said that it would be able to make cost savings of about $200m a year following the acquisitions.
Novartis’ shares closed up nearly 3% at 58.85 Swiss francs.
Top of the tree
The deal will see Novartis’ Sandoz business overtake Israel’s Teva Pharmaceuticals as the world’s biggest maker of generics.
Based on 2004 figures the newly merged producer would have sales of more than $5bn, the company estimated.
Novartis said that it would merge a number of departments, adding that there may be job cuts.
This is a very expensive acquisitionBirgit Kuhlhoff, Sal Oppenheim
“The strong growth outlook for Sandoz, which will create jobs, is expected to partially compensate for necessary reductions in the work force,” the firm said in a statement.
Generic drugs are chemically identical to their more expensive branded rivals.
Producers such as Sandoz can copy the branded products usually after their patent protection expires and can sell them more cheaply as they do not have to pay research and development cost.
Ripe for consolidation
There are more than 150 generic drugmakers worldwide and analysts have predicted consolidation in a market that they call fragmented.
However, not all analysts were initially convinced about the deal.
“This is a very expensive acquisition,” Birgit Kuhlhoff, from Sal Oppenheim investment bank, told Reuters.
“I find it strange that they are making acquisitions in exactly those markets where they suffered price pressure.”
