Merck & Co to sell consumer care business to Germany's Bayer for $14.2 bn

Merck & Co Inc today struck a deal to sell its consumer care business to Germany's Bayer AG for $14.2 billion.

The deal, which will make Bayer the second-biggest over-the-counter drugs (OTC) maker after Johnson & Johnson, is the largest in the German healthcare industry after Bayer outbid Merck to acquire Schering in 2006 for $21.5 billion.

Under the terms of the agreement, Bayer will acquire Merck's existing OTC business, including the global trademark and prescription rights for Claritin and Afrin. Claritin had sales of $471 million last year.

Merck's consumer healthcare unit is best known for its allergy medicine Claritin, Coppertone sunscreen protection range, Dr Scholls footcare products, constipation treatment MiraLax, Afrin nasal decongestant, Lotrimin and Tinactin antifungals, and Oxytrol – the first over-the-counter treatment for overactive bladder in women.

Merck & Co, Inc.'s consumer care business is a major global OTC company with strong presence in North America, the largest OTC market in the world.

Merck's consumer care business has around 2,250 employees and is based in New Jersey while its production facilities are located in the US, Canada, and China.

Merck consumer healthcare unit had sales of $1.9 billion in 2013, accounting for 4 per cent of company's total revenue of $44 billion. The US accounted for 70 per cent or $1.33 billion of the consumer unit's total sales total, while $568 million was from international markets.

The biggest product in the portfolio is an over-the-counter version of allergy drug Claritin, which had sales of $471 million last year.

Merck expects after-tax proceeds from the sale to be between $8 and $9 billion. The company said that it will use the money in those areas within its business that represent the highest potential growth opportunities.

Post closing, Bayer is expected to become a global leader in dermatology and gastrointestinals, two of the five most important non-prescription health care product categories, and advance to the number two position in the cold, allergy, sinus and flu category. Bayer said that it will remain number two in nutritionals and number three in analgesics.

Merck & Co also announced a global clinical development collaboration with Bayer to market and develop its portfolio of soluble guanylate cyclase modulators. This includes Bayer's Adempas (riociguat), for treatment of pulmonary arterial hypertension (PAH) and 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 and both companies will equally share costs and profits from the collaboration.

The collaboration also includes clinical development of vericiguat, which is currently in Phase 2 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.

''With this transaction, we are acquiring leading product brands that will make Bayer the OTC leader in North America and Latin America and also move us into top global positions in key OTC product categories,'' said Olivier Brandicourt, CEO of Bayer HealthCare.

''The strong Bayer brand will help to further leverage the already successful product brands worldwide. We expect particularly strong growth in key countries outside the US where our superior commercial presence will drive sales of the combined business,'' he added.