Sunday, February 27, 2011

Merck Sheds Its BioManufacturing Hard Capital Assets (But Not The Intangible Ones)

Merck will apparently act as a contract research and development operation for Fujifilm under this deal -- so it is likely retaining the patents and other intellectual property, but transferring to Fujifilm (or about $500 million) the hard capital assets in the manufacturing network.

This is a smart move, financially -- as it takes some of the asset load off the New Merck balance sheet, instantly increasing Merck's return on assets, even with no increase in the overall earnings levels. I won't go so far as to call this move pure "financial engineering," but there is a definite whiff of that, here (story per Reuters, as of Sunday night):

. . . .Financial terms of the deal were not disclosed, but Japanese business daily Nikkei said it will be for around 40 billion yen ($490 million).

Under terms of the agreement, Fujifilm will purchase all of the equity interests in two Merck units, Diosynth RTP LLC and MSD Biologics Ltd, which together own all assets of the Merck BioManufacturing Network comprising plants in Research Triangle Park, North Carolina, and Billingham in Northeast England.

"This acquisition provides an important addition to our pharmaceutical business with diverse capabilities and technical expertise in production of protein therapeutics," Fujifilm Chief Executive Shigetaka Komori said in a statement on Sunday.

As part of the agreement with Fujifilm, Merck has committed to certain continued development and manufacturing activities with the two units it is selling. . . .

Merck said in a statement that it will become a key customer and that it will continue to benefit from the expertise and experience of the combined businesses in biologics development and manufacturing. . . .

Stay-tuned -- as we'll see in the coming weeks what additional announcements are made -- about employee levels -- at these now Japanese-owned facilities.

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