Wednesday, June 4, 2014

Like Other Peers, Merck Said To Consider Selling Mature Branded Pharma Lines: WSJ

Of course, the trickiest question in any such a purported (series of) deal(s) is whether the buyer will close WITHOUT acquiring the central bloc/developing world rights to the same drugs -- like in Central Europe (and to a large extent, India), for example. [Recall also that Merck has already committed to sell some of these sorts of mature branded assets to Bayer -- a month ago.]

It is well known that these mature branded prescription pharma lines sell well in these markets -- in many cases continuing organic growth -- and for decades beyond patent life, too. That makes these rights quite tempting to pull off the table -- and only sell fully developed world (US, Japan and EU) rights. Whitehouse Station would have powerful motive to protect, and keep that organic growth, while on the other hand private equity buyers will pay only significantly diminished sales multiples, without the same "Rest Of World" rights included in the purchased assets. We shall see.

From the Wall Street Journal, then -- a bit -- do go read it all:

. . . .Merck has held preliminary discussions with a number of possible buyers for a group of treatments that could fetch in the neighborhood of $15 billion, according to people familiar with the matter. . . .

The businesses generally have wide profit margins, as their owners have already incurred many of the expenses associated with launching the medicines. Consequently, in a sale they could be worth a multiple of their annual sales, bankers say. The portfolios tend to have slow-growing or declining revenue, however, as many of the drugs have lost patent protection and compete with low-cost generic copies.

The deals are part of a narrowing of focus at big drug makers, which in recent months have been divesting slower-growing businesses or ones in which they have less of a competitive advantage. . . .

The Consumer Health deal packaged some of these lines up and sold them as well -- now, apparently, Whitehouse Station is looking at more of them -- casting a wider net. We shall see. I suspect no announcement is imminent.

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