Merck & Co and Schering-Plough: a Marriage of Convenience?
The prospects for a major new company
The pharmaceutical industry’s appetite for major mergers seems unabated, and the $41.1 billion Merck & Co/Schering-Plough deal - one of the largest ever mergers in the industry – has been confirmed just a few weeks after Pfizer announced that it would acquire Wyeth.
Several observers have questioned both the timing and the value of the deal, arguing that, for example, the unresolved issue surrounding the potential loss of marketing rights to Remicade and Simponi make a proper valuation of Schering-Plough impossible. Remicade posted sales of US$2.11 billion in 2008, a major contribution to its US$14.25 billion prescription pharma revenues.
The combined company faces a number of issues:
However, for Merck, the merger is expected to have a number of benefits:
Easily assess the prospects for the new company!
For a complete and concise assessment turn to this new FirstWord Report Merck & Schering-Plough: a marriage of convenience? Using primary source data and information, this 50-page report presents a timely, comprehensive yet easy-to-read briefing for all executives tracking developments in one of the industry’s major company mergers.
This cost-effective report answers key questions:
The pharmaceutical industry’s appetite for major mergers seems unabated, and the $41.1 billion Merck & Co/Schering-Plough deal - one of the largest ever mergers in the industry – has been confirmed just a few weeks after Pfizer announced that it would acquire Wyeth.
Several observers have questioned both the timing and the value of the deal, arguing that, for example, the unresolved issue surrounding the potential loss of marketing rights to Remicade and Simponi make a proper valuation of Schering-Plough impossible. Remicade posted sales of US$2.11 billion in 2008, a major contribution to its US$14.25 billion prescription pharma revenues.
The combined company faces a number of issues:
- Product pipelines, which are seen by some observers as too diverse and lack lustre
- Ongoing concerns with Zetia, Vytorin and Vioxx.
- Price reductions affecting products such as Gardasil
- Loss of patent protection on several blockbuster products in the medium term
- Adverse currency exchange rates which particularly affected Schering-Plough most of whose revenues are generated outside of the USA
However, for Merck, the merger is expected to have a number of benefits:
- Mitigation of expected revenue-loss for key products whose patents are due to expire in the near-term
- Expansion of Merck’s international presence
- Bolstering of the R&D portfolio, particularly in the area of respiratory products
- Minimal overlap in compounds
- Significant synergistic opportunities combining sales, marketing, research and other back-office functions.
Easily assess the prospects for the new company!
For a complete and concise assessment turn to this new FirstWord Report Merck & Schering-Plough: a marriage of convenience? Using primary source data and information, this 50-page report presents a timely, comprehensive yet easy-to-read briefing for all executives tracking developments in one of the industry’s major company mergers.
This cost-effective report answers key questions:
- What are the products most exposed to loss of market exclusivity and what contribution did they make to revenues in 2007 and 2008?
- What products will lose patent protection in the medium term
- What effect is the merger likely to have on the combined companies’ R&D pipelines and where are the synergies?
- What products are close to approval in the combined pipeline?
- How is the deal being financed?
EXECUTIVE SUMMARY
RATIONALE FOR THE MERGER
Schering-Plough R&D Pipeline, July 2009
Merck & Co R&D Pipeline, July 2009
Combined R&D Portfolio, by Therapeutic Area, July 2009
Respiratory Pipeline
Respiratory Franchise – Major On-Market
Respiratory Franchise – In Development
“Official” Strategic Benefits from the Merger
Leading Franchises
Effect on Revenues
Combined Company: Revenues by Therapeutic Area, 2008
Merck & Co: Revenues by Geographic Origin, 2008
Combined Company: Revenues by Geographic Origin, 2008
Financial Benefits of the Transaction
RATIONALE FOR THE MERGER STRUCTURE
Merger Mechanics
Reverse Merger = Change-of-Control?
Ambiguity of “Change-of-Control” in the Schering-Centocor Distribution Agreement
Effect of Contractual Ambiguity on Reverse Merger Structure
DEAL STRUCTURE
Future Management
Financing
Ownership
THREATS TO THE DEAL
Johnson & Johnson
Class Action
REACTIONS TO THE MERGER
Employees
Industry Comment
EFFECTS ON THE LOCAL ECONOMY
ANIMAL HEALTH INDUSTRY
R&D DEVELOPMENTS
Merck R&D – Selected Recent Developments
Tredaptive/Cordaptive
Telcagepant
Rolofylline
Schering-Plough R&D – Selected Recent Developments
Loratadine/montelukast
Sugammadex
Sycrest (asenapine)
Simponi
Issues over Simponi
Mometasone/Formoterol Combination
Schering-Plough - Recent Approvals
APPENDIX
Financial Results
Schering-Plough: Major Product Revenues, 2007-2008
Merck & Co: Major Product Revenues, 2007-2008
Recent Quarterly Financials
First Quarter 2009
Second Quarter 2009
Merck & Co: Patent Expiries
Schering-Plough: Patent Expiries
INDEX
RATIONALE FOR THE MERGER
Schering-Plough R&D Pipeline, July 2009
Merck & Co R&D Pipeline, July 2009
Combined R&D Portfolio, by Therapeutic Area, July 2009
Respiratory Pipeline
Respiratory Franchise – Major On-Market
Respiratory Franchise – In Development
“Official” Strategic Benefits from the Merger
Leading Franchises
Effect on Revenues
Combined Company: Revenues by Therapeutic Area, 2008
Merck & Co: Revenues by Geographic Origin, 2008
Combined Company: Revenues by Geographic Origin, 2008
Financial Benefits of the Transaction
RATIONALE FOR THE MERGER STRUCTURE
Merger Mechanics
Reverse Merger = Change-of-Control?
Ambiguity of “Change-of-Control” in the Schering-Centocor Distribution Agreement
Effect of Contractual Ambiguity on Reverse Merger Structure
DEAL STRUCTURE
Future Management
Financing
Ownership
THREATS TO THE DEAL
Johnson & Johnson
Class Action
REACTIONS TO THE MERGER
Employees
Industry Comment
EFFECTS ON THE LOCAL ECONOMY
ANIMAL HEALTH INDUSTRY
R&D DEVELOPMENTS
Merck R&D – Selected Recent Developments
Tredaptive/Cordaptive
Telcagepant
Rolofylline
Schering-Plough R&D – Selected Recent Developments
Loratadine/montelukast
Sugammadex
Sycrest (asenapine)
Simponi
Issues over Simponi
Mometasone/Formoterol Combination
Schering-Plough - Recent Approvals
APPENDIX
Financial Results
Schering-Plough: Major Product Revenues, 2007-2008
Merck & Co: Major Product Revenues, 2007-2008
Recent Quarterly Financials
First Quarter 2009
Second Quarter 2009
Merck & Co: Patent Expiries
Schering-Plough: Patent Expiries
INDEX
