Merck & Co stated Wednesday it would spin off its women’s health, biosimilar medication, and older products into an independent publicly traded firm as it squeezes its focus on growth drivers like cancer drug Keytruda and vaccines.
The new firm’s assets at present make up around 15% of Merck’s total sales and around half of its medicine that treats people.
Merck will retain its animal health enterprise, as well as medication used for acute care in hospitals like Bridion, which cancels the effects of anesthesia.
Merck shares dropped 3.7% to $85.12 after the U.S. drug manufacturer reported quarterly Keytruda sales below Wall Street’s lofty estimates.
The spinoff is a culmination of the drug manufacturer’s strategy of concentrating on a few vital areas, significantly oncology, where Merck has turned the immunotherapy Keytruda into one of the world’s top-selling medicine, Merck CEO Ken Frazier stated in an interview.
That begins with Keytruda, now a mainstay of many cancer regimens along with for newly recognized superior lung most cancers, the most crucial business alternative in oncology. Its gross sales jumped almost 45% to $three.11 billion, under analysts’ estimates of $three.24 billion, based on Refinitiv data.
Sales of the assets that may make up the new firm had been anticipated to fall or be flat through 2024; however, it could achieve growth through management attention, stated Kevin Ali, a Merck veteran who will head the new firm.
Merck, which expects to complete the transaction in the first half of 2021, stated the new firm would send it $8 billion to $9 billion via a special tax-free dividend. The new entity is predicted to have $8.5 to $9.5 billion in debt.
Declaration of the spinoff without more color on management succession may trigger some concern for investors stated Cantor Fitzgerald analyst Louise Chen.