Merck Announces Sale of Consumer Care Business to Bayer AG for $14.2 Billion

Merck (known as MSD outside the US and Canada) has announced that it has entered into a definitive agreement to sell its Merck Consumer Care (MCC) business to Bayer AG for $14.2 billion. Under the terms of the agreement, Bayer AG will acquire Merck’s existing OTC business, including the global trademark and prescription rights for Claritin and Afrin. 

The company also announced a worldwide clinical development collaboration with Bayer to market and develop its portfolio of soluble guanylate cyclase (sGC) modulators. This includes Bayer’s Adempas (riociguat), the first member of this novel class of compounds. Adempas is approved to treat pulmonary arterial hypertension (PAH) and is the first and only drug treatment approved for patients with chronic thromboembolic pulmonary hypertension (CTEPH).  Adempas is currently marketed in the US and Europe for both PAH and CTEPH and in Japan for CTEPH. The two companies will equally share costs and profits from the collaboration and implement a joint development and commercialization strategy.

“The sale of our consumer care business is part of our efforts to ensure that assets within our portfolio align with our core strategy, have industry-leading potential and generate long-term shareholder value,” said Kenneth C. Frazier, chairman and chief executive officer, Merck. “By unlocking value in Merck Consumer Care, we’re able to further our goal of being the premier research-intensive biopharmaceutical company through targeted investments that strengthen our product portfolio and enhance our pipeline.”

"Merck Consumer Care is a strong business with a portfolio of well-established product brands, such as Claritin, Afrin and Coppertone, that are leaders in their respective categories," said Dr Marijn Dekkers, Bayer AG Chairman of the Board of Management. "The combination of Merck Consumer Care's complementary portfolio of products and geographic reach with Bayer's will create a global consumer care business better positioned to serve consumers around the world. We look forward to having the talents of the Merck team, with their track record of innovation, joining our strong Consumer Care team at Bayer HealthCare."

The collaboration also includes clinical development of vericiguat (BAY102), which is currently in Phase II trials for worsening heart failure, as well as opt-in rights for other early-stage sGC compounds in development at Bayer. Merck will in turn make available its early- stage sGC compounds under similar terms.

In return for these broad collaboration rights, Bayer will receive a $1 billion up-front payment with the potential for additional milestone payments upon the achievement of agreed- upon sales goals. For Adempas, Bayer will continue to lead commercialization in the Americas, while Merck will lead commercialization in the rest of the world (ROW). For vericiguat and other potential opt-in products, Bayer will lead in the ROW and Merck will lead in the Americas. For all products and candidates included in the agreement, both companies will share in development costs and profits on sales and will have the right to co-promote in territories where they are not the lead.

Merck expects after-tax proceeds from the sale of MCC to be between $8 and $9 billion. The company will use the after-tax proceeds — consistent with its capital allocation strategy — to resource those areas within its business that represent the highest potential growth opportunities, such as MK-3475, to augment the company's pipeline with external assets that can create value and to continue to provide an industry-leading return of capital to shareholders.

“Both Merck and Bayer have a rich history of developing and commercializing innovative products to meet significant unmet medical needs,” said Frazier. “Our collaboration with Bayer builds on our respective strengths, and we look forward to working with Bayer in the field of sGC modulators.

“The value we obtained for our consumer business is a tribute to our colleagues who have built an outstanding business with a talented team and trusted, well-known product brands,” said Frazier. “We know the strengths of our team will serve Bayer well.”

Merck expects to close the sale of MCC in second half of 2014, subject to customary closing conditions, including regulatory approvals. The company plans to update its 2014 financial guidance when the transaction closes.