After days of speculation, Germany’s Merck KGaA has finally come out and confirmed that it is indeed looking at the possibility of selling its generics unit.

The Darmstadt-based company issued a statement saying that it evaluating the divestiture of Merck Generics “as one strategic option,” although it “is not engaged in initial discussions with any potential buyers.”

The unit posted sales of 1.8 billion euros in 2005 and operating profits of 238 million euros. The division employs approximately 5,000 people worldwide and while it has “good growth prospects for the future,” Merck chief executive Michael Roemer noted that “it will need continued investment to fully realise its potential and strengthen its market presence.”

Given the “far-reaching changes occurring in the market,” Dr Roemer said “we are considering as an option the divestiture…to a qualified buyer,” and the usual suspects are being lined up as potential purchasers for the fourth-ranked generics maker in the world.

The top three, Teva, Novartis and Watson, have all been mentioned and the last couple of years saw all of them splash out on big-money acquisitions within the sector as Teva bought Ivax Corp for $7.6 billion, the Swiss major paid $8.3 billion for Hexal AG and Eon Labs and Watson acquired Andrx Corp for $1.5 billion. Also touted as possible purchasers are private equity firms such as Blackstone and KKR or some form of consortium of brokers.

'A superb union'

Whatever happens, Merck would probably be keen to get hold of the 4-5 billion euros the unit might raise as it celebrated the completed $13.5 billion euro acquisition of Serono. Merck Serono was officially launched this morning and Elmar Schnee, chief executive of the new entity, said that the firms have “the unique opportunity to create a superb union of pharmaceutical chemistry and biotechnology.” It will have 28 projects in clinical development, a combined R&D budget of 1 billion euros and “the two key growth drivers,” the colorectal cancer drug Erbitux (cetuximab) and the multiple sclerosis treatment Rebif (interferon beta-1a).

Merck also noted that the option of looking for a buyer for the generics unit will not affect its plans to make a capital increase of 2-2.5 billion euros within the first quarter of 2007.