Merck sets up Organon spinout with a women’s health medical device acquisition

When Merck announced it would spin out its women’s health and off-patent drugs into a […]

When Merck announced it would spin out its women’s health and off-patent drugs into a new standalone business, the pharmaceutical giant said the new company would also have the capacity to add new products. Merck is giving its spinout a head start with the acquisition of a commercial-stage women’s health startup.

Merck announced Tuesday that it has agreed to pay $215 million up front to acquire Alydia Health, a company that sells a medical device designed to prevent postpartum hemorrhage (PPH), a bleeding complication of childbirth.

According to terms of the deal, $50 million of the upfront payment will be paid prior to Merck’s spinoff of its new company, Organon. The balance will be paid by Organon when the spinoff happens. Menlo Park, California-based Alydia is also in line to receive a $25 million contingent milestone payment. Merck said that it expects the Organon spinoff will be completed late in the second quarter of this year.

Merck announced the formation of the then unnamed spinout company in February 2020. The transaction will leave the Kenilworth, NJ-based company with its oncology, vaccines, hospital-based products, and animal health. When the deal was announced, Merck CEO Ken Frazier said the spinout would allow the remaining Merck to focus on innovative medicines that will add to the company’s portfolio and contribute to revenue growth.

The spinout of Organon from Merck is following similar moves by other large pharma companies. In 2019, Pfizer announced it would combine its off-patent and generic drugs business with generic drugs company Mylan. The transaction closed last November, yielding a new company named Viatris. That deal followed the merger of the consumer health business units of Pfizer and GlaxoSmithKline into a joint venture majority owned by GSK and operating under the name GSK Consumer Healthcare. Pfizer and GSK said the deal enables each company to keep its focus on developing new pharmaceuticals and vaccines.

Merck’s Organon spinout will have products representing more than $6.5 billion in global revenue in 2020, according to a financial report for the spinout. The top-seller in that portfolio was in women’s health: Nexplanon and Implanon, two versions of a birth control implant, accounted for $680 million in sales. Women’s health generated more than $1.2 billion in revenue for Merck last year. But that portfolio does not currently include a PPH product.

Treatments available for PPH include medications that contract the uterus or gauze to stop bleeding. Medical device interventions include an intrauterine balloon tamponade, which stops bleeding by inflating inside the uterus. Alydia’s Jada system works by replicating the natural contraction of the uterus. The silicon device is inserted into the uterus, where it creates negative pressure that contracts the organ and stops the bleeding.

Alydia’s submission seeking marketing authorization included data from a clinical study that tested the medical device in 106 women. The results showed that the product stopped PPH and abnormal postpartum uterine bleeding in 94% of cases. Bleeding was controlled within a median time of three minutes. The FDA granted the device 510(k) clearance last August.

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