Bayer aims to crush consumer health rivals with $14B Merck unit buyout

Courtesy of Bayer

And the winner is Bayer. After months of speculation--and reported bids from the likes of Sanofi, Novartis and Reckitt Benckiser--the German drugmaker has snagged Merck's ($MRK) consumer health unit in a $14.2 billion deal. The consumer buyout solidifies Bayer's position at the top of the global OTC game and provides Merck with a cardio collaboration--along with a hefty chunk of change.

The pickup will create a business that generated $7.4 billion in combined 2013 sales, with Merck's unit responsible for $2.2 billion of that. It's a "major milestone on our path towards global leadership in the attractive non-prescription medicines business," Bayer CEO Marijn Dekkers said.

The added top-line power will vault Bayer ahead of current OTC drug sales leader Johnson & Johnson ($JNJ), Bloomberg reports. And it will put Bayer in second place worldwide, once Novartis ($NVS) and GlaxoSmithKline ($GSK) launch their recently agreed-upon consumer health joint venture.

Bayer HealthCare CEO Olivier Brandicourt

"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," Olivier Brandicourt, Bayer HealthCare CEO, said in a statement. "We expect particularly strong growth in key countries outside the U.S. where our superior commercial presence will drive sales of the combined business."

Many expected Bayer to offer up its animal health unit as part of the deal, which would have bolstered a Merck division CEO Kenneth Frazier has said he wants to strengthen. Instead, the two companies agreed to develop and market a group of cardio drugs known as sGC modulators, which includes Bayer's new pulmonary arterial hypertension (PAH) drug, Adempas.

As part of that agreement, Merck will fork over $1 billion to Bayer up front, with additional milestone payments of up to $1.1 billion, the companies said. While Bayer will hang onto marketing responsibilities for Adempas in the Americas, Merck will take the lead in the rest of the world.

Merck CEO Kenneth Frazier

For Merck, the collaboration will bolster its own cardiovascular offerings, which have seen better days. Key products Zetia and Vytorin both saw sales shrink last year, as proof that they prevent heart attacks and strokes remained elusive. But now that the New Jersey company has consumer health off its hands, it can get back to its biopharma roots, Frazier said in a statement.

"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," he said.

- read Bayer's release
- read Merck's release
- see Bloomberg's take

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