The uncertainty surrounding the fate of Merck KGaA’s biosimilars unit has been resolved, as Germany-based Fresenius Kabi will buy the division for up to €670 million ($729 million).
At a press conference in March, Merck chief executive officer Stefan Oschmann confirmed that the company was in “deep talks” to sell the division to a then-undisclosed buyer. At the time, he suggested the biosimilars arm was worth around $1 billion due to a robust pipeline of drugs in various stages of trials, although none have yet reached the market.
This pipeline, along with the biosimilars division’s approximately 70 employees based in Switzerland, will be acquired with the newly announced purchase, according to a press release from Fresenius Kabi. The development portfolio is focused on biosimilar versions of drugs used to treat cancers and autoimmune disorders, the branded reference drugs of which currently sell for about $30 billion annually.
“The acquired biosimilars assets are an attractive opportunity for Fresenius Kabi to enter this strongly growing and highly profitable segment,” said CEO Stephan Sturm in the press release. Chief executive Mats Henriksson added that the deal will allow the company to “enhance its position as a leading player in the injectables pharmaceutical market and further diversifies its product portfolio.”
Looking to the future, the company anticipates sales to begin by the end of 2019 and grow to the “high triple-digit million” range from 2023 onwards. It will pay Merck single-digit percentage royalties determined by sales of the acquired drugs. Upon closing the deal, Merck will receive €170 million in cash, while the remaining €500 million will be distributed as “milestone payments strictly tied to achievements of development targets.”
Citing the high costs of clinical trials and regulatory requirements, Fresenius Kabi indicated that it does not expect to break even on its €1.4 billion purchase and investment ceiling until 2022, but hopes it will become profitable for the company and its shareholders by the following year.
A statement from Merck KGaA described the divestment as a “major step towards strategic alignment of [research and development] resources to healthcare priorities.” It also mentioned that the deal included agreements to ensure continuity through development support and manufacturing services.
“We have increasing confidence in our Biopharma pipeline and this transaction will help prioritize innovative drug development of high quality and first-to-market best-in-disease assets,” said executive board member Belén Garijo in the statement. “The partnership with Fresenius will allow us to exploit our biosimilars portfolio to full potential while granting us a substantial return on prior investments.”
The press release from Fresenius Kabi also announced its impending acquisition of Akorn, Inc, which sells prescription and over-the-counter products in the United States, at a price tag of $4.3 billion.
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