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Merck announces spinoff, will retain animal health

TAGS: Business
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Merck to spin off certain brands into new company while retaining oncology, vaccine, hospital and animal health pillars.

Merck, known as MSD outside the U.S. and Canada, announced Feb. 5 its intention to spin off products from its Women’s Health, trusted Legacy Brands and Biosimilars businesses into a new, yet-to-be-named, independent, publicly traded company (designated "NewCo" in the Merck announcement).

Merck said the spinoff will allow both management teams to "drive increased responsiveness to the particular needs of their patients and customers and achieve faster growth through focused and fit-for-purpose operating models."

“Over the past several years, we have purposefully shifted the focus of our efforts and resources to our best opportunities for growth,” Merck chairman and chief executive officer Kenneth C. Frazier said. “This has led to the exceptional results we are reporting today. Given the opportunities now in front of us, we believe we can benefit from even greater focus. At the same time, we believe additional resources and focus will help ensure that our expansive portfolio, including many trusted and medically important products, reach their full potential.”

Merck said it will retain its current growth pillars of Oncology, Vaccines, Hospital and Animal Health and continue to invest in research and development of breakthrough innovations across all areas of science.

The spinoff of NewCo will reduce Merck’s Human Health manufacturing footprint by approximately 25% and the number of Human Health products it manufactures and markets by approximately 50%, the announcement said. This will allow for a more focused operating model in support of its growth products. As a result, Merck said it expects to optimize its resources, grow faster and achieve meaningful operating margin expansion over time through increased productivity and efficiency.

The transaction is intended to take the form of a tax-free distribution to Merck shareholders of new publicly traded stock in NewCo. The spinoff is expected to be completed in the first half of 2021, subject to market and certain other conditions. More details can be found at merck.unleashinggrowthpotential.com.

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