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Novartis to Divest Four Products to Get EU OK for Hexal Merger

May 18, 2005

Novartis is proposing to divest a small group of pharmaceutical products as a means to gain European Union (EU) approval for its acquisition of German generics company Hexal AG.

Novartis announced in late February it had struck a deal to acquire Hexal and the U.S. generic firm Eon Labs. The deal, which would make Novartis the largest generic drug company in the world, is currently being reviewed by EU regulators. The European Commission (EC) was supposed to complete its review of the Hexal acquisition by May 12, but it recently announced the probe was being extended to May 27. The EC didn't provide a reason for the extension.

To head off any potential antitrust concerns generated by the Hexal merger, Novartis is proposing to divest four products in five selected markets, a company spokesman said. "These are products with sales that aren't significant to us," said the spokesman, who declined to identify the products to be sold. "We're in the process of finding ways to divest these products. We're hopeful that we'll gain regulatory approval soon."

Novartis has agreed to pay roughly $8.3 billion in cash for Hexal and Eon, which the company would integrate into its Sandoz unit. The combined company would have pro forma 2004 sales of roughly $5.1 billion, pushing it ahead of current market leader Teva Pharmaceutical.