Merck buys Schering-Plough

Published: March 11, 2009
By Timothy Kirn

The $41-billion merger of pharmaceutical giants Merck & Co., Inc. and Schering-Plough Corp. is expected to have significant repercussions in the animal-health market and veterinary medicine, although no details were released by either company at press time.

When the companies combine under Merck's name, animal-related products reportedly will make up 6 percent of annual revenues for the joint venture.

Merck co-owns animal-health subsidiary Merial, and in 2007, Schering purchased Intervet to create Intervet/Schering Plough Animal Health. Together, their human and animal-health products accounted for a combined $46.9 billion in 2008 revenues.

Both companies make many well known products, and in some cases they are direct competitors.

Merial manufactures the Frontline brand of flea and tick products, Heartgard and the Recombitek and Imrab vaccines. It also makes IVOMEC, an anti-parasite injection, for cattle. Intervet/Schering Plough makes Tri-Heart Plus and the Continuum and Progard vaccines.

Merial spokesman Steve Dickinson said details of how the two companies would unite are still being worked out.

“It’s all speculation at this point,” he said.

This merger follows the announcement two weeks ago that giants Pfizer and Wyeth forged a $68-billion deal. Both of these companies also have competing veterinary products. Fort Dodge Animal Health, a Wyeth subsidiary, makes the parasite-control products ProHeart and ProMeris, while Pfizer has Revolution.

Experts have said these mergers are occurring, to some extent, due to the declining stock market, which makes such purchases more affordable. Insiders speculate that the companies, affected by the downturn, also see the unions as a cost-savings measure, allowing them to lay off more employees. Officials have said the merger will save $3.5 billion annually starting in 2011.

The Merck and Schering-Plough combination is thought to make sense for Merck at a time when the company has a number of blockbuster human drugs soon coming off patent while Schering does not.

The animal-health sectors likely had little to do with the impetus for this merger, yet it might suit them because in some ways, they compliment each other, said Michael Johnson, Veterinary Information Network (VIN) director of sales and marketing. Johnson previously worked in the veterinary-drug industry and now serves as a liaison to it.

Merck’s Merial had the bigger animal-health business, but Intervet has been more innovative, he said.

“Once Pfizer and Fort Dodge got together, Merial was going to have to do something,” he said. But, “You have to remember none of this was done because of the animal health business.”

One big question, Johnson said, concerns the future of rival vaccines that the companies manufacture.

According to terms of the merger, Merck is acquiring Schering-Plough, and stockholders will receive new Merck shares in exchange. The deal is being financed with a loan of $8.5 billion, a payment of cash from Merck of $9.8 billion and $22.8 billion in Merck stock.

The new company will assume Merck’s current headquarters in Whitehouse Station, N.J. Schering-Plough is headquartered in Kenilworth, N.J.

For the merger to be finalized, it must be approved by both companies' stockholders and reviewed by the federal government for possible antitrust violations. Merck has said it expects the deal will be complete by the end of this year.

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