Merck Selling Older, Slower Growth Products Through New Pharmaceutical Company
Merck has announced its plan to spin-off products from its women's health, trusted legacy brands, and biosimilars into a new, independent, and publicly traded corporation, according to the company.
Merck has announced its plan to spin-off products from its women's health, trusted legacy brands, and biosimilars into a new, independent, and publicly traded corporation, according to the company.1
Currently referred to as "NewCo," the new company is intended to spin-off $6.5 billion in assets, which is equivalent to 15% of its prescription drug sales. This move will allow Merck to focus on faster-growing cancer drugs, vaccines, and animal health items, Merck Chief Executive Officer (CEO) Ken Frazier said in a prepared statement to The Wall Street Journal.2
“Over the past several years, we have purposefully shifted the focus of our efforts and resources to our best opportunities for growth,” Frazier said in a press release. “This has led to the exceptional results we are reporting today. Given the opportunities now in front of us, we believe we can benefit from even greater focus. At the same time, we believe additional resources and focus will help ensure that our expansive portfolio, including many trusted and medically important products, reach their full potential.”
NewCo plans to have a vast portfolio of highly profitable brands, ranging from dermatology, pain, respiratory, and select cardiovascular products. Former big sellers, such as the cholesterol drugs Zetia and Vytorin, and contraceptives NuvaRing and Nexplanon, will be included at NewCo. In addition to women's health medicines and older, off-patent brands, the new company will include less expensive versions of biosimilars that Merck makes with Samsung Bio.1-3
Although several details about NewCo are uncertain, such as its location, Merck has already named Kevin Ali as its CEO, who has 3 decades of pharmaceutical commercial experience with Merck. In addition, Carrie Cox has been named NewCo’s chair of its board of directors, who brings an extensive pharmaceutical background with a deep knowledge of women’s health, according to Merck’s official press release.1
The deal will lead to more than $1.5 billion in savings by 2024 and will reduce Merck’s manufacturing footprint by approximately 25%, according the company.2
The transaction is intended to be completed in the first half of 2021.1
- Merck to focus on key growth pillars through spinoff of women’s health, trusted legacy brands and biosimilars products into new company (“NewCo”) [press release]. Kenilworth, NJ: Merck; February 5, 2020. https://www.mrknewsroom.com/news-release/corporate-news/merck-focus-key-growth-pillars-through-spinoff-womens-health-trusted-leg. Accessed February 10, 2020.
- Hopkins, Jared S. Merck to spin off slow-growth products into new company. The Wall Street Journal. https://www.wsj.com/articles/merck-to-spin-off-slow-growth-products-into-new-company-11580903102. Published February 5, 2020. Accessed February 10, 2020.
- Herper, Matthew. Merck to spin off new $6.5 billion firm focused on women’s health, older drugs. Stat. https://www.statnews.com/2020/02/05/merck-to-spin-off-new-6-5-billion-firm-focused-on-womens-health-older-drugs/. Published February 5, 2020. Accessed February 10, 2020.