Bayer buys Merck & Co.'s OTC business for $14.2bn

Bayer looking to become global OTC leader with $14.2bn acquisition

Bayer says it will become the OTC leader in North America having acquired Merck & Co.’s consumer health business for $14.2bn (€10.2bn), in the latest shift in Big Pharma assets.

Two weeks ago it was Swiss Giant Novartis exchanging its vaccine division with GlaxoSmithKline, and last Friday saw the latest Pfizer bid for AstraZeneca rebuffed, but today Germany-headquartered Bayer has announced its acquisition of the consumer health division of Merck & Co (known as MSD outside North America).

The $14.2bn is part of Bayer’s “aspiration to become the global OTC leader,” CEO Marijn Dekkers said during a conference call, via a route of both organic and inorganic growth.

The addition of a number of key Merck brands  will almost double sales of OTCs in North America, to $2.2bn (including prescription sales of anti-allergy drug Claritin), making Bayer “the key leader in this geography,” as well as the number two leader in Europe.

However, whilst 70% of Merck’s OTC sales had been in the US, Dekkers said Bayer had the ability to take these brands global and realise revenue synergies of $400m by 2017. “With our global presence in Europe plus emerging markets such as Brazil, Russia and China,we can take these products and market these with commitment.”

As to Bayer’s predicted cost synergies of $200m to be realised by 2017, Dekkers told investors this would be achieved from the elimination of overlap, most of which would come from the marketing and sales sectors.

Manufacturing strategy and assets were not discussed, but Olivier Brandicourt, CEO of Bayer HealthCare, said on the call the acquisition was “completely complementary,” in regards to cost synergies.

sGC modulation Collaboration

Bayer and Merck have also agreed to enter a strategic collaboration focusing on sGC modulation to combat cardiovascular diseases.

“We are now joining forces in the area of sGC modulation to implement a joint development and commercialization collaboration that allows both companies to better explore the medical potential of the novel soluble guanylate cyclase (sGC) modulators,” Merck’s CEO Kenneth Frazier said in a statement.

The two firms will equally share costs and profits from the sGC modulators and implement a joint development and commercialization strategy. For Bayer’s drug Adempas (riociguat) – approved by the US FDA last October – the German firm will lead commercialisation in the Americas, with Merck responsible for the rest of the world.

Merck will pay Bayer up to $2.1bn, comprising an up-front payment of $1bn and milestomne payments related to future collective sales collaboration compounds including Adempas.

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