Merck Will Make Its Biosimilars Spinoff a Publicly Traded Company

Merck said it is taking steps to register its planned biosimilar and women’s health products spinoff as a publicly traded stock corporation. The company filed a Form 10 registration statement with the Securities and Exchange Commission for Organon, which will become an independent business entity housing brands currently under the Merck umbrella, including the women’s health and biosimilar products.

Although biosimilars are on their way to becoming veritable blockbusters for some companies, based on recent revenue reports, this has not been the case for Merck.

Organon, based in White House Station, New Jersey, is slated to become an independent company by the end of the first half of 2021. Merck acquired the company through its merger with Schering-Plough in 2009.

“Merck is confident that the spinoff will deliver significant benefits for both companies, better meet patient and customer needs, and create value for Merck shareholders,” said Rob Davis, executive vice president of Global Services and chief financial officer for Merck, in a statement.

In partnership with Samsung Bioepis, Merck markets infliximab (Renflexis), trastuzumab (Ontruzant), and etanercept (Brenzys, Eticovo) biosimilars, although not all in the United States, and the products were developed by Samsung Bioepis, not Merck. The company has previously predicted that Organon will generate 75% of its sales revenue from markets outside the United States. In sum, the products included in the spinoff generated 2020 revenue of $6.5 billion for Merck.

Biosimilar Revenues Weak

The biosimilars to be included in the Organon portfolio generated roughly $250 million in 2019. Kenneth C. Frazier, Merck’s chairman and CEO, said at the time of the spinoff announcement that the company has shifted “the focus of our efforts and resources to our best opportunities for growth.” In its 2020 earnings and revenue breakdown, Merck did not provide details on specific biosimilar earnings.

In the United States, the market for infliximab biosimilars has been the most disappointing in terms of uptake. An Amgen report last year stated that as of the second quarter of 2020, infliximab biosimilars had achieved a 20% share of the US market for infliximab, despite having been introduced in the first quarter of 2017. Biosimilars are competitors to originator brands and, costing less to develop, are expected to be offered at discounts; however, in practice, their acceptance and use in the United States have been gradual and the savings achieved modest compared with early forecasts.

Trastuzumab biosimilars were introduced in the United States in the second quarter of 2019 and have been on the market for less time than infliximab biosimilars, but they achieved a 39% share of the trastuzumab market by the second quarter of 2020, according to the Amgen report.

In the United States, etanercept biosimilars have been delayed due to litigation. Sandoz developed the biosimilar Erelzi to compete in this market and received FDA approval in August 2016; however, launch of this product is not expected to occur before 2028, owing to Amgen’s patent rights on the original product (Enbrel). Eticovo was approved in 2019 but no launch date has been announced.

Organon’s full year 2021 revenue is expected to be somewhere between $6 billion and $6.5 billion, Merck said. “Organon will be well positioned for growth led by its women’s health and biosimilars portfolios, with expected low to mid single-digit annual revenue growth off of a 2021 base year,” Merck said in a 2021 earnings statement.

Although Merck is stepping out of the biosimilars business via this spinoff, that was not the case for Pfizer when it discharged its Upjohn unit in 2020, allowing for the formation of Viatris. Pfizer held onto its biosimilars portfolio, which generated $525 million in the fourth quarter of 2020, up 86% from the comparable 2019 quarter. Mylan, which merged with Upjohn to become Viatris, also is deeply invested in biosimilars.