Merck spinoff to focus on women’s health, legacy brands and biosimilars

Listen to this article

Kenilworth-based Merck on Wednesday announced its intention to spin off products from its women’s health, trusted legacy brands, and biosimilars businesses into a new – yet-to-be-named – independent, publicly-traded company.

Nearly 90 products will be shifting to the new company, which include cholesterol drugs Zetia and Vytorin and the contraceptive Nexplanon—in total they generate annual sales of $6.5 billion.

According to Merck, the spinoff, which is expected to be completed by the first half of 2021, will allow both management teams to drive increased responsiveness to the particular needs of patients and customers, and achieve faster growth through focused and fit-for-purpose operating models.

The entity is expected to be headquartered in New Jersey and will employ 10,000 to 11,000. Roughly 75 percent of sales are expected to come from outside the U.S.

“By optimizing our human health portfolio, Merck can move closer to its aspiration of being the premier research-intensive biopharmaceutical company, while also properly prioritizing a set of products at NewCo that are important to public health and the patients who rely on them, and which present real opportunities for growth,” said Merck Chairman and Chief Executive Officer Kenneth Frazier.

The spinoff of NewCo will reduce Merck’s Human Health manufacturing footprint by approximately 25 percent and the number of Human Health products it manufactures and markets by approximately 50 percent. This will allow for a more focused operating model in support of its growth products.

As a result, Merck said it expects to optimize its resources, grow faster and achieve meaningful operating margin expansion over time through increased productivity and efficiency.

Merck will continue to benefit from growth across its current key pillars of Oncology, Vaccines, Hospital and Animal Health, while remaining committed to investing in research and development in pursuit of innovations across all areas of science, and to driving value from its deep late-stage pipeline. As a premier research-intensive biopharmaceutical company, Merck will continue its pursuit to advance the prevention and treatment of diseases.

Merck said that the separation is designed to enhance the focus of both Merck and NewCo to better meet the needs of its patients and customers, and achieve faster growth and greater value for stakeholders.

The transaction enables Merck to achieve in excess of $1.5 billion in operating efficiencies by 2024.  

Kevin Ali, who brings three decades of pharmaceutical commercial experience from within Merck, will be named chief executive officer of NewCo, and Carrie Cox will be named chairman of the board of directors. Cox has extensive experience in the pharmaceutical industry and deep expertise in women’s health.