Merck to Focus on Key Growth Pillars Through Spinoff of Women?s Health, Trusted Legacy Brands and Biosimilars Products into New Company (?NewCo?)
NewCo to be a Leading Women?s Health Company; Represents Total Revenue of Approximately $6.5 Billion for Merck in 2020
- Separation to enhance focus of both Merck and NewCo to better meet the needs of their patients and customers and achieve faster growth and greater value for all stakeholders
- Merck to benefit from strong growth across its current pillars of Oncology, Vaccines, Hospital and Animal Health, while aspiring to be the premier research-intensive biopharmaceutical company
- Transaction enables Merck to achieve in excess of $1.5 billion in operating efficiencies by 2024; targeting Non-GAAP operating margin greater than 40%
- NewCo will pursue global leadership and sustainable growth in Women?s Health; will realize full potential of its trusted Legacy Brands and rapidly expanding Biosimilars products
- Merck to retain its dividend of $2.44 per share post separation and anticipates future increases with the goal of achieving a 47% to 50% payout ratio over time; NewCo expected to pay an incremental dividend
- Transaction intended to be completed in the first half of 2021
February 05, 2020 06:45 AM Eastern Standard Time
KENILWORTH, N.J.--(BUSINESS WIRE)--Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced its intention to spin-off products from its Women?s Health, trusted Legacy Brands, and Biosimilars businesses into a new, yet-to-be-named, independent, publicly traded company. The spinoff will allow both management teams to drive increased responsiveness to the particular needs of their patients and customers and achieve faster growth through focused and fit-for-purpose operating models.
Merck will continue to benefit from strong growth across its current key pillars of Oncology, Vaccines, Hospital and Animal Health, while remaining fully committed to investing in research and development in pursuit of breakthrough innovations across all areas of science and to driving value from its deep late-stage pipeline. As a premier research-intensive biopharmaceutical company, Merck will continue its pursuit to advance the prevention and treatment of diseases that threaten people and communities around the world.
?Over the past several years, we have purposefully shifted the focus of our efforts and resources to our best opportunities for growth,? said Kenneth C. Frazier, chairman and chief executive officer, Merck. ?This has led to the exceptional results we are reporting today. Given the opportunities now in front of us, we believe we can benefit from even greater focus. At the same time, we believe additional resources and focus will help ensure that our expansive portfolio, including many trusted and medically important products, reach their full potential. We have therefore made the decision to separate into two growth companies: Merck and NewCo. By optimizing our human health portfolio, Merck can move closer to its aspiration of being the premier research-intensive biopharmaceutical company, while also properly prioritizing a set of products at NewCo that are important to public health and the patients who rely on them, and which present real opportunities for growth.?
SPINOFF CREATES TWO INDEPENDENT GROWTH COMPANIES
Compelling Strategic Rationale for Spinoff
Merck believes the spinoff will deliver significant benefits for both Merck and NewCo and create value for Merck shareholders. The transaction is expected to create two companies with:
- Enhanced strategic and operational focus on key drivers to accelerate growth,
- Improved agility to anticipate and respond to customer needs and rapidly evolving market dynamics,
- Simplified operating models with reduced complexity and improved efficiencies,
- Optimized capital structures and resource allocation to pursue their distinct strategic agendas for long-term success and deliver greater returns to shareholders, and
- Improved financial profiles making for unique and compelling investment cases.