The agreed sale was formally announced yesterday, after several other potential buyers fell by the wayside in recent weeks. The purchase, which at almost €5bn is almost 16 times the unit's 2006 operating result, is a major boost to Mylan's business and places the company firmly among the generic big guns. The Merck Generics purchase nicely compliments Mylan's August 2006 purchase of over 70 per cent of Indian based Matrix Laboratories, which gave the company control of the second largest active pharmaceutical ingredient (API) manufacturer in the world. Combining the Matrix purchase with this latest acquisition boosts Mylan's business by creating a significant vertically integrated supply chain, reducing costs and increasing efficiency through Matrix' 10 API and pharmaceutical intermediate manufacturing plants furlling teh generics production. The acquisition will contribute over 400 products to Mylan's portfolio, as well as reinforcing the company's international presence. Already having expanded its presence in emerging markets such as India, China and Africa through the Matrix Labs purchase, the addition of Merck Generics bolsters the company's position in key global markets including Australia, France, Japan, Portugal, Spain and the UK. According to Mylan, the combined company would have had pro forma earnings before tax hitting approximately $1bn (€0.74bn) in 2006, and revenues of around $4.2bn - a significant hop up from Mylan's 2006 sales of $1.3bn. With a portfolio of around 560 products, the new company will have manufacturing capabilities in a range of dosage forms including solid oral, patches, controlled release, inhalants and creams among others. "The combination with Merck Generics will significantly extend our range of therapeutic categories and dosage forms, and bring us a number of new, differentiated products and successful franchises," a statement from Mylan read. The sale of the Merck business has been a hot topic since the news broke back in January this year. At the time, analysts scrambled to put together a list of likely suspects who could be keen to snap up the blooming business. Potential candidates included Novartis, Barr Pharmaceuticals and Sanofi-Aventis, as well as Icelandic firm Actavis and Israel-based Teva who both only recently dropped out of the race, Actavis citing price levels being offered by other bidders as too rich to warrant further involvement on its part and Teva claiming the company "did not fully meet [its] investment criteria". Merck KGaA's decision to hive off the generics business came following the purchase of Swiss biotech firm Serono for €10.6bn in 2006. After such a hefty investment, throwing the necessary cash towards the generics business to make it a real player in the competitive generics arena was seen as essentially unviable, so a sale in the comparatively favourable generics market made strategic sense. With initial industry estimates putting a price tag for the business at around €4bn, Merck appears to have done well in securing almost a billion above this, which will no doubt help in reducing the company's debt following the Serono purchase. The transaction, which is due to be complete in the second half of this year, will now allow Merck to focus more keenly on pushing growth in its pharmaceuticals and chemicals sectors. For Mylan's part, the acquisition can be expected to reinforce its already significant foothold in the generics market, and widen the company's geographic reach - not only key in terms of market access, but also noted by the firm as helping to reduce risks associated with over-reliance on any one region. The deal is perhaps somewhat representative of the current climate within industry, with competition between generic drug manufacturers leading to market consolidation, as both generics manufacturers and other pharma firms snap up producers of 'copy cat' drugs in a bid to expand product portfolios, crowd out smaller competitors and reduce costs. With the generics market forecast to continue growing strongly - by 13 per cent during 2007 alone according to IMS Health - and over 70 major drugs due to come off patent between 2007 and 2011, the sector is ripe for exploitation by pharmaceutical companies able to get in on the game and invest in the generic bubble before it bursts.