Merck &Co/MSD’s fourth quarter results were overshadowed by the announcement that it plans to spin out $6.5bn worth of assets in an attempt to streamline focus on ‘key growth drivers’.
Speaking in a conference call yesterday, Merck CEO Ken Frazier (pictured below, right) said that the decision was a “purposeful shift, coupled with greater prioritisation and focus 
on key growth drivers that has led to the unprecedented growth that we are now experiencing”.
The decision itself does not come as a surprise, given that the trend of carving out low-growth assets into separate divisions has been growing among big pharma companies for some time, with the likes of GlaxoSmithKline and Pfizer announcing similar ventures.
The NewCo will be led by Kevin Ali, a long-time Merck veteran, who will oversee the spinoff of Merck’s women’s health, legacy brands and biosimilar products. His experience includes serving as president of MSD international and the company’s emerging markets unit, and he will be joined by Carrie Cox, ex-CEO of Humacyte, who will chair the NewCo’s board.
The combined value of these products total around 15% of Merck’s human health revenues – an estimated $6.5bn – although Merck’s chief financial officer Rob Davis (pictured below, left) pointed out that they also consume “a much larger share of our operations and resources”.
The aim of the spinoff is to simplify Merck’s business, while also giving it more freedom to focus on its pipeline and growth products, particularly in oncology, where the company has found resounding success.
That success is based almost entirely on Merck’s key growth product Keytruda (pembrolizumab), which is firmly solidifying its blockbuster status. The drug grew 46% to $3.1bn in the most recent quarter and brought in $11bn for the full year – a 58% growth from 2018.
Despite its continuing growth – thanks to a growing number of indication across a number of cancer types – analysts have raised concerns that Merck is too reliant on Keytruda, with the divestment exacerbating the risks associated with what some feel is an over-dependence on the PD-1 inhibitor.
Responding to these concerns, Frazier said that the company are “mindful” of the issues that have been raised around Keytruda, also adding that “we have more than Keytruda, we have Lenvima and Lynparza. We also have 20 molecules behind that. We also have our vaccines business, our hospital and specialty business”.
Elsewhere, Merck highlighted the growth of AstraZeneca-partnered PARP inhibitor Lynparza (olaparib), which Davis said “maintains a greater than 60% total patient share in the PARP inhibitor class in the US”.
Merck will hold onto its vaccine, hospital and animal health portfolio, although it is clear that a majority of its slick new focus will be on its oncology products and pipeline.