German chemical and pharmaceutical company Bayer has entered into a definitive agreement to acquire the consumer care business of US-based Merck for $14.2bn.
Under the terms of the agreement, Bayer will acquire Merck’s existing over-the-counter (OTC) business, including the global trademark and prescription rights for Claritin and Afrin. Merck’s Consumer Care business includes brands such as Claritin, Coppertone and Dr Scholl’s.
Bayer has also entered into a global co-development and co-commercialisation agreement with Merck for its portfolio of soluble guanylate cyclase (sGC) modulators. For this transaction, Bayer will receive up-front payment of $1bn from Merck, with substantial additional sales milestone payments.
Bayer claims that the company is expected to achieve global leadership positions in dermatology and gastrointestinal and advance to the number two position in the cold, allergy, sinus and flu category upon completion of the acquisition of Merck’s consumer care business.
The company will remain number two in nutritionals and number three in analgesics, according to Bayer.
Bayer HealthCare CEO Olivier Brandicourt said: "The strong Bayer brand will help to further leverage the already successful product brands worldwide. We expect particularly strong growth in key countries outside the US where our superior commercial presence will drive sales of the combined business."
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The $14.2bn transaction includes a payment associated with sales of Claritin and Afrin in certain countries where these products are still prescription-only.
Bayer expects one-time costs of approximately $500m related to executing the transaction and combining the businesses, primarily in 2014/2015.
Subject to approval from the relevant antitrust authorities, the deal is expected to close in the second half of this year.
Bayer is likely to finance the acquisition with a bridge facility provided by Bank of America, Merrill Lynch, BNP Paribas and Mizuho.
The company has also agreed to enter into strategic pharma collaboration with Merck in the field of cardiovascular diseases with a focus on sGC modulation. This collaboration includes Bayer’s Adempas (riociguat) and vericiguat.
Adempas has been approved for treatment of certain classifications of pulmonary hypertension and is being developed in additional lifecycle indications
Vericiguat is an investigational compound that is currently being developed in two Phase IIb studies in worsening chronic heart failure.
The two companies have also agreed that sGC modulators presently in earlier stages of research and development may be included in the collaboration.
Bayer will lead the commercialisation for Adempas in the Americas, while Merck will be responsible for this outside the Americas.
Merck will lead commercialisation for vericiguat and other potential investigational sGC modulators in the Americas, while Bayer will lead the commercialisation outside the Americas.
The two companies will equally share costs and profits from the collaboration and implement a joint development and commercialisation strategy.
Merck will make payments to Bayer of up to $2.1bn, comprising an up-front payment of $1bn and sales milestone payments of up to $1.1bn related to future collective sales of certain collaboration compounds including Adempas.
Image: Merck’s over-the-counter products. Photo: courtesy of Bayer AG.