Merck KGaA will hold onto its consumer health biz--for now

Uta Kemmerich-Keil, CEO of Merck Consumer Health

Selling off OTC businesses is the trend du jour in Big Pharma, but Merck KGaA is not jumping on the bandwagon. The company is planning to hold on to its consumer healthcare unit in a move that could deliver a much-needed boost as it deals with its slumping drug portfolio.

Merck KGaA expects to rack up $1 billion in 2014 sales by expanding its over-the-counter division and has no intention of letting go of its consumer healthcare business, Uta Kemmerich-Keil, CEO of Merck Consumer Health said in a briefing, Reuters reports. The company in September shelled out $17 billion for laboratory supplies maker Sigma-Aldrich ($SIAL), prompting some speculation of a possible sale of its consumer unit. But for now, at least, Merck is not budging.

"We really want to stick to that business," Kemmerich-Keil explained in the briefing in London (as quoted by Reuters). "Our strategy is a pure growth strategy and by the end of this year we will hopefully hit the $1 billion sales mark."

The company also has its eye on global markets, planning to have at least three leading brands with a minimum 3% market share in target countries, including a number of emerging markets like Brazil where demand for OTC products is growing by leaps and bounds. The strategy falls in line with Merck KGaA's plans to beef up its presence overseas, as in July CEO Karl-Ludwig Kley said that the company would add nonprescription drugs to its offerings in China to achieve sales of €1.3 billion by 2018.

Small, bolt-on acquisitions or licensing deals could help Merck KGaA achieve its sales goals in the long run, but the drugmaker does not feel the need to make any large-scale deals for now, Kemmerich-Keil said during the briefing.

"OTC is a local play, so you need to make sure in the markets you are in that you are strong," she said. "It's not important how big the overall business is."

Merck KGaA is far from the only company with its eye on OTC growth, as big names in pharma are looking for their cut of the profits. In April, Novartis ($NVS) pulled off a $20 billion asset swap with GlaxoSmithKline ($GSK), melding its over-the-counter medicines and health products with Glaxo's consumer unit. The resulting business, dubbed "GSK Consumer Healthcare," is expected to produce $10 billion in annual sales, competing with larger, consumer-focused rivals.

In May, Bayer snatched up Merck's ($MRK) consumer health unit for $14.2 billion, vaulting the drugmaker to the top of the OTC market and helping it develop a stronger presence overseas. Last month, Perrigo ($PRGO) snatched up Belgium's Omega Pharma in a deal valued at $4.5 billion, fueling its international growth strategy and solidifying the drugmaker's position in the European OTC market.

- read the Reuters story

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