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Merck & Co reveals plans for women’s health spinoff Organon

Company is expecting tax-free dividend of $9bn following close of spinoff

Merck & Co has revealed plans for its women’s health spinoff company Organon, which is set to launch next month with a majority-female board of directors.

Organon’s portfolio will contain over 60 medicines and products across three core franchises at launch – women’s health, biosimilars and established brands.

The company will also go beyond offering products for contraception and fertility in a bid to ‘broaden its definition of women’s health’, to address conditions that either are unique to women or that disproportionately affect them.

With this in mind, Merck & Co – known as MSD outside the US and Canada – envisions that Organon will be sitting within an addressable market of more than $60m by 2026.

In Merck & Co's 2020 sales, products within Organon’s roster brought in approximately $6.6bn, with many of those sales driven by its contraceptive and biosimilars franchises.

In particular, Merck & Co has identified that much of Organon’s growth prospects exist outside the US, with nearly 80% of the revenue generated by its products coming from international markets.

“The spinoff of Organon will help Merck become a leaner, more focused and agile company with stronger growth, and will enable significant operating efficiencies,” said Rob Davis, president, Merck & Co.

“Organon, as a standalone company, will be better positioned to realise its potential and to have a meaningful impact, particularly in women’s health. We believe this transaction will create value for the patients both companies serve and for Merck shareholders,” he added.

During an earnings call last week, Merck & Co’s chief executive officer Ken Frazier added that the spinoff will allow the company to focus not only on its key growth drivers – namely blockbuster checkpoint inhibitor Keytruda (pembrolizumab) – but will also “enable necessary investments”.

Merck & Co’s chief financial officer Caroline Litchfield added that, upon close of the Organon spinoff, the company is expecting to receive a tax-free dividend of $9bn.

No specifics were revealed in relation to Merck & Co’s intentions for that dividend, but Litchfield said the company is hoping to deploy the funds generated from the spinoff in “a value-enhancing strategic business development opportunity”.

Davis added: “We are open to any opportunity to add a meaningful asset. Size is not determined by dollars. Size is determined by complexity and the disruption it brings to our business.”

Article by
Lucy Parsons

5th May 2021

From: Sales

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