Merck snaps up Schering-Plough for $41bn

Consolidation in the pharma industry has continued this month with Merck set to buy rival Schering-Plough for US$41bn (Euro 32bn), creating one of the world's largest pharma companies.

This follows Pfizer's acquisition of Wyeth for US$68bn in January.

The merger unites the cholesterol drugs Zetia (ezetimibe) and Vytorin (ezetimibe/simvastatin), worth US$4.5bn in annual sales, and will simplify the combined company's approach to the cardiovascular market, as well as create opportunities to develop new medicine combinations.

"We are creating a strong, global healthcare leader built for sustainable growth and success," said Richard Clark, ceo of Merck.

Fred Hassan, chairman and chief executive officer of Schering-Plough, said the merger would create a "dynamic new leader" in the pharma industry.

Clark will lead the new company, to be called Merck, while Hassan will participate in the integration planning until the transaction closes.

The two companies had combined revenues of US$47bn in 2008 and the merger should result in cost savings of approximately US$3.5bn annually after 2011.

Both companies announced job losses last year and it is not yet clear whether the merger will mean more people will lose their jobs.

Datamonitor said as a stand-alone company, Merck would have faced a "tough future of declining sales" because four brands - Singulair, Cozaar/Hyzaar, Fosamax and Zocor - are all expected to suffer intense generic competition out to 2013, and a "wall of expiring products" will wipe US$6.1bn from annual sales. The merger will therefore return the company to a "positive sales growth outlook".

Clark said the combined company would benefit from a "formidable" research and development pipeline, a broader portfolio of medicines and an expanded presence in key international markets, particularly in high-growth emerging markets.

The acquisition will double the number of potential medicines Merck has in Phase III development, bringing the total to 18.

The combined company will also have a more diverse portfolio across cardiovascular, respiratory, oncology, neuroscience, infectious disease, immunology, women's health and other areas.

Schering-Plough brings a leading animal health business with strength in small molecules to the merged entity, as well as the Dr Scholl's and Coppertone consumer health brands.

The company's immunology and inflammation franchise is expected to make an important contribution to the new company. However, Datamonitor says for this to materialise, issues surrounding the company's partnership with Johnson & Johnson will have to be resolved.

At the same time as it announced the deal, Merck said it expected full-year 2009 revenue to be in the range of US$23.7bn to US$24.2bn.