Merck’s biosimilar business to power NewCo spinoff

Merck & Co. reported biosimilar sales of $250 million in 2019 and says the revenues will be used to grow its spinout company NewCo, also comprising of its women’s health and legacy brands.

Merck & Co. (known as MSD outside North America) announced the creation of NewCo in line with its Q4 and full year 2019 results. The new entity will group the company’s women’s health assets and legacy brands together, along with its biosimilars business.

Left alone, Kevin Ali – CEO of NewCo – said the women’s health assets and legacy brands revenue was expected to be flat to declining through 2024 due to limited investment focus. But by focusing management’s attention through the spinout and allocating relevant resources he said “NewCo will achieve sustainable growth and create value outside of Merck.”

Merck is spinning out its biosimilar, women’s health, and legacy brands business. Image: iStock/tifonimages

Speaking on the investor call, he explained: “Although revenues are expected to decline in 2021 versus 2020 to a base of approximately $6 billion to $6.5 billion, largely due to the loss of exclusivities of [cholesterol drug] Zetia [ezetimibe] in Japan, and [contraceptive] NuvaRing (etonogestrel/ethinyl estradiol vaginal ring) in the US. The new company will be well-positioned to achieve low-single-digit revenue growth off of that base.”

The resources allocated to grow the company will come from Merck’s “rapidly growing biosimilars business,” he added.

Through its partnership with Samsung Bioepis, Merck has three products on the market: Renflexis (infliximab-abda), Ontruzant (trastuzumab-dttb) and Hadlima (adalimumab-bwwd). According to Ali sales of these three products “are expanding rapidly,” pulling in around $250 million (€227 million) for the full year 2019.

“NewCo is well-positioned to benefit from increased biosimilar demand as markets around the world continue to seek healthcare cost savings through greater biosimilar adoption in a growing market.”

He added that along with the women’s health business, biosimilars are expected to account for more than 50% sales by 2024.

For the full year, across all its brands, Merck announced sales of $46.8 Billion, up 11% year-on-year.