Teva is said to bid €4.5 billion for Merck's generic-drug unit

FRANKFURT: Teva Pharmaceutical Industries is bidding more than €4.5 billion to acquire the generic drugs unit of Merck KGaA, two people with direct knowledge of the process said.

Teva, the world's biggest generic-drug maker, and Mylan Laboratories are the remaining contenders for the Merck unit after Apax Partners Worldwide and Bain Capital dropped out of the running last week, said the people, who declined to be identified because the auction is private. A decision on the winning offer will be announced in the next two weeks, they said. Teva's bid is worth $6 billion.

Merck, based in Darmstadt, Germany, said in January that it was considering selling the unit, one of the world's largest makers of generic medicines. The acquisition would give Teva, based in Petah Tikva, Israel, wider distribution of its products and would extend its lead over Novartis, the world's second-largest generic-drug maker.

"It bodes well for Merck," said Ulrich Huwald, an analyst at M.M. Warburg in Hamburg. "We're slowly entering the price dimensions the company had hoped for. The bidding is lively."

Merck, which is not affiliated with the drug maker Merck & Co., based in Whitehouse Station, New Jersey, is looking to pay down debt from its $13.7 billion purchase last year of Serono, a Swiss biotechnology company.

Merck shares slipped 5 cents to €100 at the close of trading in Frankfurt. They have gained 29 percent this year. Shares of Teva declined 2.90 shekels, or 1.8 percent, to 155.20 shekels in Tel Aviv.

"We do not comment on future activities," Ayala Miller, a spokeswoman for Teva, said in a statement.

A Merck spokeswoman, Phyllis Carter, declined to comment, as did spokesmen for Bain, a buyout firm based in Boston, and Apax, a private equity company based in London. A spokesman for Mylan, a generic-drug maker based in Canonsburg, Pennsylvania, could not be reached for comment.

The Merck division had €1.8 billion in revenue last year, and accounted for about 20 percent of the parent company's revenue and a quarter of operating profit in the first quarter.

Interest in generic-drug companies is increasing as patents expire and governments seek ways to stem the rising cost of public health care. The global market for generic medicines is projected to grow to $100 billion by 2010, and competitors including Teva and smaller Indian rivals like Dr. Reddy's Laboratories are making purchases to expand and maintain profit growth.

Actavis Group of Iceland dropped out of the bidding for the Merck unit on Thursday because the price was too high, people familiar with the auction said. It was the second time Actavis backed out of a major acquisition over price concerns in less than a year. In October it dropped a bid for Pliva, a Croatia-based company, after Barr Pharmaceuticals offered $2.5 billion.

Ambereen Choudhury reported from London.

Shire, a British drug maker, sued Teva Pharmaceutical Industries in a bid to block U.S. regulatory approval of a generic version of the epilepsy treatment Carbatrol.

Teva, the world's biggest generic-drug maker, is seeking approval from the U.S. Food and Drug Administration to sell a low-cost version of the medicine. In its complaint, filed last week in U.S. court in New York, Shire contends that Teva's product would infringe on two patents expiring in 2011 and 2016.

Carbatrol, which won FDA approval in 1997, generated $68.3 million in sales last year for Shire, based in Basingstoke, England. A price increase pushed U.S. sales to $15.5 million in the first quarter, a 10 percent gain from a year earlier. The number of prescriptions declined by 6 percent. About 2.7 million people in the United States suffer from epilepsy. Carbatrol is taken as a capsule or sprinkled on food.

The complaint seeks a ruling that would block approval of Teva's version of the drug before the expiration of Shire's patents.

Shire, which had $1.8 billion in sales last year, has sued other companies to block generic versions of Carbatrol, including Nostrum Pharmaceuticals and Corepharma. The cases are pending in U.S. court in New Jersey.

A spokeswoman for Teva could not be reached for comment.