Bayer is paying $14.2 billion for Merck & Co's consumer care business, pushing the German group to the the global number two position in over-the-counter products.
The purchase, which was widely expected after Reckitt Benckiser pulled out of the running for the unit, gives Bayer a portfolio of well-established category-leading products, such as the anti-allergy franchise Claritin, the cold remedy Afrin and Coppertone sun creams. Sales of the combined businesses in 2013 came to $7.40 billion, with Merck's unit contributing $2.2 billion.
Olivier Brandicourt, head of Bayer HealthCare, noted that the firm will now be the OTC leader in North and Latin America, adding that "we expect particularly strong growth in key countries outside the USA where our superior commercial presence will drive sales of the combined business".
Merck chief executive Kenneth Frazier, said that "by unlocking value in…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". The US major expects after-tax proceeds from the sale to be between $8-$9 billion.
On the pharma front, Merck is paying Bayer $1 billion to market and develop the latter's portfolio of soluble guanylate cyclase (sGC) modulators, which includes Adempas (riociguat) which is already approved for pulmonary arterial hypertension and chronic thromboembolic pulmonary hypertension.
The collaboration also includes vericiguat (BAY102), which is currently in Phase II for worsening heart failure. Both companies also have early-stage sGC compounds in development.
Commenting on the sale, Ana Nicholls, healthcare analyst at The Economist Intelligence Unit, noted that some shareholders will want Merck to spend the proceeds partly on paying down its debts, "which are still high from its 2009 purchase of Schering-Plough". However, she added, "on past form, Merck is more likely to return cash to shareholders, or it may be on the lookout for acquisitions…that could supplement its late-stage pipeline".