Pfizer. AstraZeneca. Eli Lilly. Novartis. GlaxoSmithKline (GSK) . And, now Bayer and Merck.
Bayer will be taking over the consumer care (and non-prescription drug) business of Merck. For $ 14.2 billion, Bayer will be come the second largest provider of OTC (over-the-counter) products;’ second mostly because of the merger of Novartis and GSK that we discussed yesterday. And, there’s another part of this deal- Bayer will co-develop a series of cardiovascular therapies (for which Merck will shell out about $ 2 billion).
So, for twice the annual revenue (not profit- just gross sales), Bayer will acquire these new product lines. It also provides Bayer entre to the US market. (What you don’t understand- or may not recall, Bayer lost control of the Bayer trademark in the US during World War I; it wasn’t until 20 years ago when they reacquired the right to their name in the US from Winthrop Laboratories. {Remember PhisoHex?)
While these are not pharmaceuticals per se (OK, I am provincial- if they are not prescription drugs, then they don’t really count), this is a battle for shelf space. Not much different than what occurs in supermarkets- he who controls the shelf controls the revenue.
70% of Merck’s’ consumer business is generated in the US. But, given those numbers, it’s not surprising that Merck’s business overseas is pretty anemic- but will grow dramatically now that these products will be part of Bayer. And, this part of business is not really Merck’s- it acquired this sector’s interests when Schering-Plough was taken over (2009)- and is only 4% of Merck’s total revenue. So, strategically, this is a very smart move for Merck and an outstanding move for Bayer.
And, that means that Merck will be stressing its prescription drug business- and it’s R&D efforts. So, that really is good news for pharmaceuticals. Because the sale of the consumer products/OTC division will afford Merck with a pretty big warchest. And, their goal is to focus on the development of MK-3475, an oncology drug with great promise- and to discern what licensing or acquisitions will be possible to augment their current business.
That’s the kind of focus big pharma really needs.
