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(TRENTON, New Jersey) Merck & Co is buying Schering-Plough Corp for US$41.1 billion in stock and cash in a deal that gives the companies more firepower to compete in a drug industry facing slumping sales, tough generic competition and intense pricing pressures.
The deal announced yesterday would unite the maker of asthma drug Singulair with the maker of allergy medicine Nasonex and form the world's second-largest prescription drugmaker. Merck and Schering are already partners in a pair of popular cholesterol fighters, Vytorin and Zetia.
The latest combination comes only a few weeks after Pfizer Inc announced it has agreed to pay US$68 billion for Wyeth.
Big companies across the pharmaceutical industry are facing slumping sales as the blockbuster drugs of the 1990s lose patent protection, complicated by a dearth of major new drugs coming on the market.
Merck and Schering-Plough, along with most of their rivals, are currently eliminating thousands of jobs and restructuring operations to further cut costs.
'There'll be no immediate changes' to staffing levels, Merck spokeswoman Amy Rose said. 'Eventually, we anticipate an approximate 15 per cent reduction in the combined company's headcount,' implying nearly 16,000 fewer jobs.
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Merck chairman and CEO Richard Clark said 'this is a uniquely complementary match'. He said the combined company will be 'well-positioned for sustainable growth through scientific innovation' and have a strong, diversified product portfolio.
'We'll double Merck medicines in (late-stage development) to 18,' he added, and get Schering-Plough products that, unlike many of Merck's and their competitors' products, won't face generic competition for several years.
Schering-Plough CEO Fred Hassan said in an interview that those drugs include Nasonex, Pegintron for hepatitis, cancer drug Temodar, the Nuvaring contraceptive and the two cholesterol drugs, all of which have patent protection until 2014 or later.
The two companies had a combined US$47 billion in revenue in 2008, nearly as much as the largest drugmaker Pfizer, which posted US$48.42 billion. Pfizer is in the midst of acquiring Wyeth, which would add more than US$20 billion to its annual revenue.
Merck has about 55,200 employees and Schering-Plough, which grew significantly with its November 2007 acquisition of Dutch biopharmaceutical company Organon BioSciences, has about 50,800 employees.
Schering-Plough's shareholders will get US$10.50 in cash and 0.5767 Merck shares for each Schering-Plough share they own. That's a 34 per cent premium to Schering-Plough's closing stock price on Friday.
Stock would cover 56 per cent of the deal's funding, with the other 44 per cent in cash: US$9.8 billion in existing cash balances and US$8.5 billion in financing committed by JPMorgan Chase & Co, the companies said.
The two New Jersey pharmaceutical companies said that Mr Clark will lead the combined company, which will be a dominant player in treatment areas including cholesterol, respiratory, infectious disease and women's drugs, as well as vaccines.
Schering also makes the biotech arthritis drug Remicade, plus a host of popular consumer products such as the Coppertone suntan line and Dr Scholl's foot products. -- AP
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