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Merck & Co.'s RNAi divestiture driven by focus on core businesses strategy

By Dan Stanton , 14-Jan-2014
Last updated the 14-Jan-2014 at 13:21 GMT

Merck & Co.’s divestiture of its RNA interference business (RNAi) was part of a strategy to cut $2.5bn and focus on core areas, according to its CEO.

Yesterday, in-Pharmatechnologist.com reported the gene silencing pharma firm Alnylam had taken advantage of the January sales and acquired Sirna Therapeutics from Merck & Co. (known as MSD outside North America) for $175m (€128m).

Sirna was acquired by Merck in October 2006 for $1.1bn but CEO Ken Frazier was unconcerned at its drop of value at the 32nd Annual J.P. Morgan Healthcare Conference yesterday, telling investors the sale of the drug delivery subsidiary - amongst other business units - was integral to Merck’s strategy moving forward.

In October 2013, the company revealed it was looking to save $2.5bn by 2015 by reducing its network in non-core areas. “We’ve moved quickly to divest certain assets - such as Saphris [a schizophrenia treatment sold to Forest Labs] and ophthalmic products in the US [sold to Akorn in November]” he said, adding “we also recently announced the deal to divest our RNAi technology.”

Frazier named diabetes, oncology, vaccines and acute care the core focus of the new slimline Merck and Sirna and its development of novel peptides delivery vehicles using gene silencing techniques for siRNA therapeutics, did not form part of Merck's strategy going forward.

“To unlock value on our noncore areas, we assess on an ongoing basis whether particular assets are core to our strategy whether they provide comp advantage and whether they would generate greater value as part of Merck or outside Merck.”

Multi-Pharma Swap Shop?

Frazier also told stakeholders the firm was currently assessing certain other assets, days after Bloomberg reported rumours Merck was in talks with Novartis to potentially exchange its over-the-counter (OTC) consumer health unit for the Swiss firm’s animal health and human vaccine businesses.

“[The divestiture] process has intensified over the past few months and we are evaluating the role of our animal health and consumer care businesses,” he said.

“As a result we could very well reach different decisions about these two businesses. In any event we expect the process to be completed with actions reached by the end of this year.”

Manu-fracturing?

Merck previously told this publication the $2.5bn restructuring programme would initially focus mostly on cuts in SG&A and R&D, with certain actions affecting the sector from 2015 onwards.

Frazier did not approach the subject in his presentation, but within the last four months the firm has announced a number of plans to sell or shutter manufacturing sites in Ireland , France, Spain , the US and Puerto Rico , as well as completing the sale of a Dutch API plant to Aspen .

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