Merck to spin off women’s health, legacy brands and biosimilars into new company

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Merck to spin off women’s health, legacy brands and biosimilars into new company

By Sandra Levy - 02/10/2020

Merck announced during its earnings call that it is spinning-off products from its women’s health, trusted legacy brands, and biosimilars businesses into a new, yet to be named, independent, publicly-traded company to be headquartered in New Jersey.

The spinoff will allow both management teams to drive increased responsiveness to the particular needs of their patients and customers and achieve faster growth through focused and fit-for-purpose operating models, the company said.

“Over the past several years, we have purposefully shifted the focus of our efforts and resources to our best opportunities for growth,” Merck chairman and CEO, Kenneth Frazier said. “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."

Frazier added, “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. We have therefore made the decision to separate into two growth companies: Merck and NewCo. 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.”

Merck said it will retain its oncology, vaccines, hospital and animal health and continue to invest in research and development of breakthrough innovations across all areas of science.

NewCo will pursue global leadership and focused, sustainable growth in women’s health led by the growing and patent-protected Nexplanon (etonogestrel implant) franchise and fueled by its leading contraceptive and fertility businesses.

NewCo expects to establish a leading position in biosimilars along with its partner, Samsung Bioepis, focusing on its current portfolio including Renflexis (infliximab-abda) and Brenzys (etanercept) in immunology and Ontruzant (trastuzumab-dttb) in oncology, and is well-positioned to be a partner in the commercialization of biosimilars worldwide, the company said.

NewCo will have a large portfolio consisting of dermatology, pain, respiratory, select cardiovascular products including Zetia (ezetimibe) and Vytorin (ezetimibe/simvastatin), as well as the rest of Merck’s diversified brands, with strong cash flows that will support investments in future growth opportunities. In addition, NewCo will pursue opportunities to partner with biopharmaceutical innovators looking to commercialize their products by leveraging NewCo’s scale and presence in fast growing international markets, the company said.

NewCo will have a global footprint with approximately 75% of sales generated from ex-U.S. markets, significant scale and geographic reach, world-class commercial capabilities, and approximately 10,000 to 11,000 employees, Merck said. 

Kevin Ali will serve as NewCo CEO. Ali has led Merck’s enterprise portfolio strategy initiative, reporting to Frazier, for the past year. Prior to this, Ali served in many leadership roles within Merck, including president, MSD International; president, emerging markets; senior vice president in charge of the bone, respiratory, immunology and dermatology franchise; managing director of Germany and managing director of Turkey.

“Built on the foundation of a trusted, high-quality portfolio, NewCo will help people around the world live healthier lives, with a special focus on investing in innovations for the distinct healthcare needs of women,” Ali said. “We are committed to becoming a leader in Women’s Health driven by organic and inorganic opportunities fueled by our portfolio of trusted legacy brands and our commitment to growing our rapidly expanding biosimilars business.”

Carrie Cox will become NewCo’s chairman of the board of directors. Cox has extensive experience in the pharmaceutical industry and deep expertise in women’s health, formerly serving as chairman of Array BioPharma, CEO and chairman of Humacyte, president of Global Pharmaceuticals at Schering-Plough Corporation (acquired by Merck in 2009), executive vice president of Pharmacia Corporation and vice president of Women’s Health Care at Wyeth-Ayerst.

“I am delighted to be joining the leadership of NewCo and excited by the growth opportunities in its portfolio,” Cox said. “The time has come for a company dedicated to serving the healthcare needs of women, in addition to a broad portfolio that continues to be important for the public health needs of patients around the world.”

The spinoff is expected to be completed in the first half of 2021.

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