Germany's Bayer to buy Merck's consumer health unit for $14.2 billion

Out-Law News | 07 May 2014 | 2:43 pm | 2 min. read

Germany's Bayer AG health care group has agreed to buy US group Merck & Co's consumer health business for $14.2 billion, Bayer has confirmed, in a deal it says will make it the world's number two manufacturer of over-the-counter (OTC) medicines.

In a related transaction, Bayer has also entered into an agreement with Merck for the joint development and commercialization of soluble guanylate cyclase modulators (sGC), which are linked to cardiovascular treatment. Merck will make an up-front payment to Bayer of $1 billion for this part of the deal, as well as "substantial additional sales milestone payments", Bayer said.

Announcing the deal, Bayer chief executive Dr. Marijn Dekkers, said: "This acquisition marks a major milestone on our path towards global leadership in the attractive non-prescription medicines business. At the same time we are leveraging our capabilities in the cardiovascular therapeutic area.”

A statement by Bayer said: "The acquisition will give Bayer the global number two position in non-prescription OTC products following recently announced consolidations in this highly attractive and growing healthcare industry segment, and will significantly enhance Bayer’s business across multiple therapeutic categories and geographies."

The Merck health arm includes the Coppertone sunscreen brand, the Claritin allergy medicines brand and Dr Scholl's foot health brand.

“With this transaction, we are acquiring leading product brands that will make Bayer the OTC leader in North America and Latin America and also move us into top global positions in key OTC product categories,” said Olivier Brandicourt, chief executive of Bayer HealthCare. “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 U.S. where our superior commercial presence will drive sales of the combined business.”

Bayer said that on completion of the deal, it expects to achieve global leadership positions in dermatological and gastrointestinal medicines, which it described as "two of the five most important non-prescription health care product categories." It expects to become number two in the cold, allergy, sinus and flu medicines category.

Bayer said that the purchase price of $14.2 billion includes a payment associated with sales of Claritin and Afrin in some countries where these products are still prescription-only drugs. According to the Financial Times Bayer expects to generate about $200m in annual savings by 2017 through the merger of its consumer healthcare business and that of Merck.

Bayer also revealed details of a joint collaboration for the development and commercialisation of cardiovascular medicines, with a focus on sGC modulation.

"Cardiovascular diseases represent one of the most significant therapeutic areas," said a statement by Bayer. "Despite previous achievements there remains high medical need, for example, in various diseases such as certain forms of pulmonary hypertension or heart failure. Novel modulators of the sGC pathway may have the potential to address this need. However, major development efforts and clinical programs are required to fully explore the benefits of these novel compounds. This collaboration brings together two leading companies in this field."

Dekkers said: “Merck’s expertise and global presence in the cardiovascular therapeutic area make it a collaboration party of choice for our sGC programs."

Bayer and Merck will equally share costs and profits from the sGC modulators, Bayer said. Under the terms of the deal, Merck will make payments to Bayer of up to $2.1 billion, comprising an up-front payment of $1.0 billion followed by sales milestone payments of up to $1.1 billion related to future collective sales of certain collaboration compounds.