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Novartis said to hold talks to buy generics maker Amneal

By Manuel Baigorri, Ed Hammond and James Paton Bloomberg

Novartis is in talks to acquire U.S. generic-drugs maker Amneal Pharmaceuticals as the Swiss health-care company seeks to bolster its Sandoz business amid consolidation in the industry, according to people familiar with the matter.

Novartis and Amneal may reach an agreement soon, the people said, asking not to be identified because the deliberations are private. No final decision has been made and talks could still fall apart or closely held Amneal could attract other suitors, the people said.

Amneal, founded in 2002, makes the antiviral acyclovir to treat bouts of herpes as well as gabapentin for epilepsy and pain. A sale could value the company at as much as $8 billion depending on the structure of the deal, two of the people said, though negotiations are ongoing. Amneal is working with an adviser as it explores options, two of the people said. Representatives for Novartis and Bridgewater, New Jersey-based Amneal declined to comment.

Novartis shares dropped 1 percent to 71.75 Swiss francs at 1:04 p.m. in Zurich trading. The stock has dropped almost 17 percent so far this year.

The acquisition would extend a wave of mergers that has redefined the industry. In August, Teva completed its $40.5 billion purchase of a division from Allergan Plc to once again become the world’s biggest maker of generics. It’s also a difficult time for drugmakers as U.S. prosecutors bear down on generics companies in a sweeping criminal investigation into suspected price collusion. Novartis’s Sandoz unit got a U.S. Justice Department subpoena in March requesting documents related to marketing and pricing of copycat medicines.

Amneal is a family owned business led by co-founders Chintu and Chirag Patel, according to its website. It counts more than 4,000 employees and operations in North America, Australia, Europe and Asia. Its portfolio of generic treatments includes about 115 approved molecules in the U.S. in a range of therapeutic areas. The company has also challenged patents held by Israel’s Teva Pharmaceutical Industries Ltd. for blockbuster multiple sclerosis treatment Copaxone, and Jazz Pharmaceuticals Plc’s narcolepsy drug Xyrem.

Europe’s second-biggest drugmaker by sales has signaled its interest in deals as speculation mounts that it’s weighing a potential sale of its shares in crosstown rival Roche Holding. Beyond its focus on late-stage cancer or pharmaceutical assets, Novartis may also consider purchases that could strengthen its generics unit, Chief Executive Officer Joe Jimenez said in an interview last month. Redeploying cash held in assets such as the Roche stake into acquisitions would be “ideal,” Jimenez told investors.

“If we were able to locate, let’s say, differentiated generics that would strengthen Sandoz’s position in certain geographies, that would be another priority,” the CEO said in the interview, commenting on his company’s focus in weighing acquisitions.

A potential acquisition would be a “bolt-on” deal in line with Novartis’s recent comments and would help Sandoz maintain its third position in the U.S. generics market, Morgan Stanley analysts wrote in a note Monday. It also may lower the chances of a large transaction for Novartis, according to the report.

Novartis is also keeping all options open regarding its Alcon eye-care unit, Chairman Joerg Reinhardt said in an interview published in Switzerland’s SonntagsZeitung Sunday.

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