By Carl O'Donnell and Greg Roumeliotis
(Reuters) - German chemicals and pharmaceuticals company Merck KGaA (DE:MRCG) is exploring a sale of its biosimilars unit, according to people familiar with the matter, as that business faces fierce competition from larger players in the sector.
Biosimilars, the biotechnology-based equivalents of generic drugs, have become increasingly popular amid a drive to curb price increases. Stefan Oschmann, however, who took over as Merck's CEO earlier this year, has been focused on finding ways to safeguard his company's leading position in the multiple sclerosis market. Its top selling drug in this space is Rebif.
Merck has hired investment bank JPMorgan Chase & Co (N:JPM) to sound out potential buyers for the biosimilar business, the people said on Friday. There is no guarantee that the discussions will result in any deal, they added.
Merck's biosimilars business could be worth as much as $1 billion because of its long-term sales potential, the people said.
The sources asked not to be identified because the deliberations are confidential. Merck, which is independent of U.S. drug marker Merck & Co Inc (N:MRK), declined to comment. A JPMorgan spokeswoman offered no immediate comment.
Merck's biosimilar business includes a drug in advanced clinical trials that is a competitor to AbbVie Inc's (N:ABBV) popular arthritis treatment Humira. The unit also has several early-stage compounds.
Merck is facing off against several larger competitors, including Pfizer Inc (N:PFE) and Novartis AG (S:NOVN), both of which have won regulatory approval for biosimilar drugs.
Biosimilars have become an increasing area of focus for investors and industry executives in the past year, as regulators have begun approving a handful of compounds in the United States.
Biosimilars are more complex than traditional drugs, requiring genetically engineered proteins. The U.S. Food and Drug Administration was not allowed to consider generic versions of biologic drugs until U.S. President Barack Obama's Affordable Care Act was enacted in 2010.
So far, the FDA has approved four biosimilar drugs, most recently a competitor for Humira made by Amgen Inc (O:AMGN). There are more than 60 biosimilars awaiting approval.
More of those drugs are expected to be approved in the coming years, as biologic drugs representing more than $30 billion in sales will lose their patent protection between now and 2020, according to data from IMS Health.
In Europe, where biosimilars were approved by regulators as early as 2006, more than 21 biosimilars made by 14 companies have been approved.