Merck to Spinoff New Company

Merck has announced plans to spin-off products from its women’s health, legacy brands and biosimilars businesses into a new, independent, publicly-traded company (NewCo). Merck will continue to benefit from strong growth across its current key pillars of oncology, vaccines, hospital and animal health, while remaining fully committed to investing in R&D and to driving value from its deep late-stage pipeline, according to its website.

In the words of Merck Chairman and CEO Kenneth C. Frazier, “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.”

The spinoff of NewCo will reduce Merck’s human health manufacturing footprint by approximately 25% and the number of human health products it manufactures and markets by approximately 50%. This will allow for a more focused operating model in support of its growth products. As a result, Merck expects to optimize its resources, grow faster and achieve meaningful operating margin expansion over time through increased productivity and efficiency.

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. NewCo is expected to be headquartered in New Jersey.

The transaction is intended to take the form of a tax-free distribution to Merck shareholders of a new publicly traded stock in NewCo. The spinoff is expected to be completed in the first half of 2021, subject to market and certain other conditions. (Source: Merck Website, 5 February, 2020)