Generic drugmaker Akorn has agreed a $640 million cash deal to acquire Hi-Tech Pharmacal to diversify its pipeline beyond ophthalmic pharmaceuticals.

The deal will create a combined company with annual sales in excess of $500 million that will have a strong position in eyecare but also other niche dosage forms such as oral liquids, topical creams and ointments, nasal sprays and otics, said Akorn's chief executive Raj Rai.

Akorn has been growing at break neck speed over the last few years, with annual revenues rising from $86 million in 2010 to $256 million last year on the back of both organic growth and the acquisitions of Advanced Vision Research in 2011 and Kilitch Drugs last year.

It has been billed as a potential takeover target itself given the appetite of big generics players for private label and specialty companies, and the latest deal looks set only to enhance that appeal.

Hi-Tech Pharmacal makes a range of prescription and over-the-counter products and has carved out a niche in hard-to-manufacture drugs - including liquid and semi-solid dosage forms - that are resistant to competition.

Combining the two companies strengthens Akorn’s current position as the third-largest player in the US market for generic ophthalmic drugs, in addition to the expansion into new product categories, and boosts the number of generic drug applications in the US from 57 to 75.

Rai described the agreement as a "transformative event for our company" that would also add branded OTC products in the nasal, topical and cough/cold category to Akorn's existing TheraTears brand of OTC eye care products.

Hi-Tech Phamacal has also been growing fast in recent years, with sales of $232 million in the fiscal year ending June 30 of this year, although it has been under a little pressure of late thanks to competition and price reductions for its big-selling fluticasone nasal spray product.

The company's chief executive David Seltzer said the merger would create a company with a "combined portfolio of marketed products and products in development [that] offers a very unique platform with great growth potential."

The transaction is expected to close in the first quarter of 2014, and Akorn anticipates cost savings of $15 to $20 million from the deal.