Merck, Pfizer need to jettison consumer health units before the market deteriorates

Over the last year, several consumer health units were put on sale. Both Pfizer (PFE) and Merck (MRK) planned to dispose their consumer health businesses since they failed to return profits, dampening their efforts to innovate in other segments. However, bidders eventually lost interest in Merck’s consumer health line, even as the auction of Pfizer’s consumer health unit gained traction.

But the latest reports suggest that Merck and Mylan (MYL) are engaged in talks with regards to the transfer of the consumer health business.

The brutal reality is that the global consumer health market has been suffering, with a steep decline in sales and operations, mostly due to innovation deficit. This has forced the pharma giants to consider exiting this business and shifting focus to other profitable sectors.

Merck has set itself a huge target for 2022. The drugmaker intends to generate yearly revenue of $2.38 billion by 2022, primarily contributed by prescription drugs for cancer and multiple sclerosis.

The competition to acquire Merck’s consumer health division lost momentum when potential buyers Nestlé and Reckitt Benckiser walked out of the bidding race as they failed to meet Merck’s price expectation. But a Reuters report suggests that Mylan is in advanced talks with the maker of Seven Seas vitamins. And the price they are offering for the stagnant consumer health unit is about $4.3 – 4.9 billion. However, Mylan rubbished this report, calling it untrue.

Merck and Mylan (MYL) are engaged in talks with regards to the transfer of the consumer health business.

A deal with Merck would make sense for Mylan because it would only help the company boost its efforts in strengthening over-the-counter products. Mylan had earlier in 2016, acquired Meda with an intention of expanding its global footprint and also to offer more exposure to the over-the-counter products.

Mylan and Merck both have been in a deal earlier. In 2005, Mylan paid 5 billion euros to acquire the generic business asset from Merck. But not much is known whether Mylan will even acquire the consumer health line from Merck. Chances are bleak considering the fact that Mylan had $14.7 billion in debt at the end of last year and just $368 million in cash.