Merck KGaA Revamps | Chemical & Engineering News
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Web Date: January 10, 2007

Merck KGaA Revamps

Company eyes generics sale to help fund Serono buy
Department: Business

Germany's Merck KGaA has completed the $14 billion acquisition of Swiss biopharmaceutical company Serono. Merck's combined drug operations have been renamed Merck Serono and will be headquartered in Geneva, Serono's home base.

Merck has launched an integration program that includes 25 teams charged with combining the two businesses. In one change, Merck says it will build a $240 million plant for the cancer drug Erbitux in Switzerland, rather than at its Darmstadt, Germany, headquarters as announced last September.

At the same time, Merck confirms that it is evaluating the sale of its generics division, called the number three generic drug company in the world. The division had sales of roughly $2.3 billion in 2005 and operating profits of more than $300 million.

Although Merck says it is "not engaged in initial discussions with any potential buyers," financial analysts have already named various candidates. One is India's Ranbaxy Laboratories, which last year acquired GlaxoSmithKline's generics business in Germany and Spain.

Other potential buyers include Novartis and Israel's Teva Pharmaceutical Industries, both of which have been building up their generics businesses. Private-equity investors could also be interested.

"Merck Generics has a strong business with excellent leadership and good growth prospects for the future," says Merck Chairman Michael Römer. "However, it will need continued investment to fully realize its potential and strengthen its market presence."

Whatever it does with the generics business, Merck still plans to issue shares during the first quarter to raise its capitalization by $2.6 billion to $3.3 billion. The company has also launched an offer to buy out all Merck Serono shares still held by private individuals.

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