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Bayer to swallow Merck

Merck CEO Kenneth Frazier says the company will use the money from its deal with Bayer to invest in areas with greater growth potential.

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Merck CEO Kenneth Frazier says the company will use the money from its deal with Bayer to invest in areas with greater growth potential.

TRENTON, N.J.

Germany's Bayer plans to buy U.S.-based Merck & Co.'s consumer health business, creating a combined medicine cabinet of household names from Bayer's aspirin to Merck's Claritin allergy pills.

The $14.2 billion deal, announced Tuesday, would vault Bayer atop the nonprescription medicine business across North and Latin America. It would make Bayer No. 1 worldwide in skin and gastrointestinal products, No. 2 in the huge cold and allergy category, and No. 3 in pain relievers.

"We are combining two highly complementary businesses with virtually no overlap that will improve our product position over multiple categories," said Marijn Dekkers, Bayer's CEO.

Merck, widely considered the most research-driven U.S. pharmaceutical company, would divest a slow-growing business it inherited in 2009 when it bought Schering-Plough to get its experimental prescription medicines.

According to businessinsider.com, Merck — which announced late last year that it was laying off about 8,500 employees — expects its after-tax proceeds to be between $8 billion and $9 billion.

Bayer, which invented aspirin more than a century ago, has a major over-the-counter division whose brands include Aleve pain reliever, Alka-Seltzer and One-A-Day vitamins. It would add Merck's Claritin, the Coppertone sun-care line, Dr. Scholl's foot-care products and MiraLAX laxative.

The transaction is part of a recent surge in pharmaceutical industry deals. Some drugmakers are selling or swapping business segments to focus on areas where they have the most expertise, marketing prowess and prospects for growth, as Merck is doing. Others, like Bayer, are making acquisitions to beef up their portfolios of products or experimental drugs to boost future sales.

Merck CEO Kenneth Frazier said the company would use sale proceeds to invest in business areas with the highest growth potential and beef up its drug pipeline.

The transaction, expected to close after June, requires regulatory approval.

Bayer and Merck also agreed to cooperate on developing and selling drugs in a new class, sGC modulators, which have potential for treating some heart conditions — long a Merck strength. Merck would initially pay Bayer $1 billion, with up to $1.1 billion in future payments contingent on sales.

The partnership includes a Bayer drug approved in the U.S., Adempas, for treating high blood pressure in lung blood vessels. It also features a chronic heart-failure drug in midstage patient testing and other experimental drugs in earlier stages of research.

Merck, like other major drugmakers, has seen prescription drug sales slide amid cheap generic competition for several drugs that once raked in billions annually.

Bayer to swallow Merck 05/06/14 [Last modified: Tuesday, May 6, 2014 7:18pm]

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