ZURICH - Novartis AG is buying the injectable generic cancer drugs business of Austria's EBEWE Pharma and may pursue other similar deals as it fleshes out a planned diversification away from brand-name treatments.
The Swiss firm, which said on Wednesday it is paying 925 million euros ($1.3 billion) in cash for the business, is also looking forward to a successful 2009 despite the recession, Chief Executive Daniel Vasella told Reuters.
I would say we had a good start to the year and I'm confident that the year will be a good one, despite the economic challenges, Vasella said in a telephone interview.
Asked about further acquisitions, he said major buys were unlikely as Novartis is still committed to securing a majority of eye care company Alcon Inc (ACL.N).
I would rather say we are of course looking at every possibility in fields where we are already active, Vasella said, specifying areas including generics and biotechnology products.
In common with many other major drugmakers, Novartis is working to boost its generics portfolio and development pipeline to offset the loss of revenue from a spate of patent expiries on best-selling medicines.
Novartis' first-quarter net profit beat expectations last month as pharmaceutical sales impressed, but it has warned ongoing currency losses from the strong U.S. dollar could hit its full-year results. [ID:nLN2232]
Vasella said a negative currency impact on the business still remains, but it is difficult to predict movements for the rest of the year.
He sees little signs of a slowdown for Novartis, although consumers are cutting back in some self-pay areas, for example opting for cheaper alternatives to branded over-the-counter medicines.
Wednesday's EBEWE deal boosts generic medicine unit Sandoz and underscores Novartis' drive to insulate its business against the looming loss of exclusivity on top-selling medicine Diovan, which treats high blood pressure.
The acquisition is noteworthy because traditional cancer drugs are expensive and hence cheaper generic alternatives are attractive for patients and a high-growth area, Vasella said.
Overall it is a relatively high acquisition price, but in an interesting growth area and hence possibly a small positive for Novartis, analysts at ZKB said.
EBEWE's injectable neurological products business is excluded from the deal, which will be financed from existing cash resources and cash flow.
Novartis will acquire the research, development and manufacturing assets of the cancer business, including a production site in Austria, as well as intellectual property and related expertise.
The deal, which requires regulatory approval, is expected to be completed in 2009 and Novartis expected no impact on its ratings with international credit agencies.
EBEWE, which has about 500 employees and became independent in 2001 through a management buy-out, had sales of 188 million euros in 2008, according to Novartis. Operating profit was 53 million euros.
Novartis shares rose 0.3 percent to 44.42 Swiss francs by 0857 GMT, roughly in line with a slightly stronger European health care sector .SXDP. (Editing by Dan Lalor, John Stonestreet) ($1 = 0.7337 euro)