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| Merck CEO Kenneth Frazier |
Merck CEO Ken Frazier, during a presentation at the JPMorgan Healthcare Conference late Monday, didn't come anywhere near touching on rumors that his company is in discussions with Novartis ($NVS) about swapping its consumer health business for the Swiss company's vaccine and animal health operations. He made clear that there was no predetermined decision to rid itself of its animal health or consumer business and suggested Merck ($MRK) might sell one and keep the other. Whatever the decision, however, it will happen in 2014.
"We could very well reach different decisions about these two businesses," Frazier said at the event in San Francisco. "Whatever action, if any, we intend to conclude by the end of this year."
Bloomberg last week reported the rumor that has been bubbling around the industry for some weeks, one that makes sense to lots of folks: a no-tax asset swap. Novartis gives up vaccines and animal health and Merck trades off its OTC business. That could give Merck the heft in animal health that Frazier has said its biz lacked, as well as added punch for vaccines, an area the company is focused on. Novartis, in return, gets some help for its consumer health business, an area it wants to grow, but one that has struggled in recent years.
The need to make a decision about the units was only one piece of Frazier's market update. He also talked about four categories the company is focused on: vaccines, immunology, emerging markets and diabetes drugs. Through the first three quarters of 2013, they grew by 15%, 12%, 7% and 5%, respectively. He said sales of the company's underlying portfolio grew by 3% in the 9-month period.
As for the company's decision to lay off 8,500 employees in an effort to cut $2.5 billion more in costs by the end of 2015, Frazier said: "Given we are committed to being a premier research-oriented company going forward, that led us to the need to look at our operating base to make sure it was sustainable."
- here's the Merck release