P&G buys Merck health brands for $4.2B

P&G also announced it will split up its consumer care joint venture with Teva, PGT Healthcare, on July 1, saying strategies were no longer aligned.

This includes Merck employees who, through their work, are fully dedicated to consumer health, and employees in share deal entities, it added.

"P&G's global scale and strategic interest in the health and well-being of consumers provide an excellent basis for accelerating growth, leveraging our teams' capabilities and expanding the Consumer Health business profitably", commented Belén Garijo, Member of the Executive Board of Merck.

The Merck unit has got vitamin brands Femibion and Neruobion in its portfolio.

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Big players in the pharmaceutical industry are turning away from the more steady revenues of consumer health products and toward the higher risk, higher reward area of novel drug development. The brands are sold primarily in Europe, Latin America and Asia. Consumer products were also at the core of a $20 billion asset swap between GlaxoSmithKline plc and Novartis AG that began in 2014.

The German pharma major, which has been looking at various options for the consumer health business since last September, will use the sale proceeds mainly to reduce its debt.

By the end of 2017, GSK ranked as the world's largest consumer health company, according to market research firm Euromonitor International. Its latest deal reinforces that position, at a time when the Cincinnati-based company is experiencing sluggish growth. "First, it allows P&G to diversify its consumer health portfolio geographically, as Merck KGaA has well-built presence across Europe, Asia, and Latin America, whereas nearly half of P&G's consumer health sales fall just in the U.S. It also makes sense to expand P&G's portfolio from pure OTC towards the faster-growing vitamins and dietary supplements categories where Merck KGaA plays most directly; more than three-quarters of Merck's global sales come in the form of vitamins and dietary supplements, while more than 80% of P&G's consumer health sales fall in OTC". But it did want Merck KGaA's.

"The deal gives the maker of Crest toothpaste a stable of products with sales growth of 6% in the past two years, double the pace of traditional consumer goods such as razors, diapers and tissues", write K Oanh Ha and Jeff Sutherland for Bloomberg. Merck KGaA's stock, conversely, was up less than 1% Thursday morning.

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