Merck to spin off drugs worth $6.5B into new company

The company, currently labeled only “NewCo,” will focus on Merck’s women’s health, legacy products and biosimilars, while Merck itself focuses on oncology, vaccines, hospital drugs and animal health. The drugmaker’s shares fell more than 4% when markets opened Wednesday.

One of the largest drugmakers in the U.S. plans to spin off its women’s health, older drugs and biosimilars divisions into a new company representing billions of dollars in sales.

Kenilworth, New Jersey-based Merck said Wednesday that it would spin off products estimated to be worth $6.5 billion in revenue into the new company, currently referred to only as “NewCo” and expected to be headquartered in New Jersey. The drugmaker said the move would allow it to save $1.5 billion by 2024 while it anticipates strong growth in oncology, vaccines, hospital and veterinary drugs. The company plans to finish the move in the first half of 2021.

Shares of Merck fell 4.2% on the New York Stock Exchange when markets opened Wednesday and remained down more than 3% in the morning.

“Over the past several years, we have purposefully shifted the focus of our efforts and resources to our best opportunities for growth,” Merck CEO Kenneth Frazier said in a statement. “This has led to the exceptional results we are reporting today.”

Products that the spun-off company will market include women’s health drugs like the implant Nexplanon (etonogestrel) and older ones like the cardiovascular drugs Zetia (ezetimibe) and Vytorin (ezetimibe, simvastatin). For biosimilars, the new firm will work with Samsung Bioepis and focus on products like Renflexis (infliximab-abda), Brenzys (etanercept) and Ontruzant (trastuzumab-dttb). In all, the company expects the spinoff to reduce its manufacturing footprint for human drugs by 25% while reducing the number of drugs it manufactures and markets by 50%. About 75% of the new company’s sales are expected to come from outside the U.S.

Some other large drugmakers have made similar moves. In July, New York-based Pfizer said it would spin off its division making off-patent branded and generic drugs, Upjohn, which would then merge with Pittsburgh-based generic drugmaker Mylan. In November, the new company’s name was announced as Viatris. In December 2018, Pfizer and London-based GlaxoSmithKline said they would spin off their respective consumer health businesses into a joint venture.

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