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| Lek: its production capacity and |
Some of the biggest pharmaceutical companies have been exiting from the generics business but Novartis has made it clear that it intends to expand its share. The world's second-biggest pharmaceuticals company believes that the patent explosion of the past five years is slowing, and that a good toehold in generics will help it to undercut rivals, particularly arch-rival GlaxoSmithKline (GSK), the biggest pharmaceuticals company.
One of GSK's best-selling drugs is Augmentin, which is used to treat pneumonia and sinusitis. Revenues from this drug last year were around $2 billion. Novartis has been producing a generic version of the drug in Switzerland, but production capacity has been reached.
Slovenian company Lek made sense as an acquisition for Novartis for three reasons. It had the capacity to make lots of generics cheaply, it made its own generic version of Augmentin and of other big drugs made by Novartis's rivals, and it gave Novartis a stronger presence in central and eastern European markets.