Merck & Co. announces merger with Schering-Plough Corp.

NEW YORK

Weeks after Pfizer announced that it would acquire Wyeth, another large drug maker has announced major acquisition plans.

Merck & Co. announced Monday that it would buy Kenilworth, N.J.-based Schering-Plough Corp. for $41.1 billion, or $23.61 per share. The combined company will use the Merck name.

The companies said the deal would boost their research and development pipelines, bringing the total number of drug candidates in phase 3 testing to 18. It also would create an expanded product portfolio, particularly in such therapeutic areas as cardiovascular disease, respiratory diseases, cancer, neuroscience, infectious diseases, immunology and women’s health. In addition, Merck will acquire Schering-Plough’s extensive OTC division.

Despite the expanded pipelines and portfolio, however, the pipeline overlap is minimal; both companies have similar IGF-1R monoclonal antibodies for colorectal cancer in their pipelines, which could require the new company to divest one of them.

“[It’s] remarkable, but it’s probably the only case where we have pipeline overlap, which lead to a decision probably as to what we are going to do in terms of prioritization,” Merck Research Laboratories president and EVP Peter Kim said in a conference call with investors and analysts. “And given the size of these two pipelines and the degree of complementarity, it’s really quite remarkable that there is only really that one case where I think we are going to have to make a decision.”

The boosted pipeline, product portfolio and OTC division could give the Merck a leg up as big drug makers face increasing generic competition. The drug maker is already one of the world’s largest, with $17.6 billion in sales and more than 121 million prescriptions in 2007, according to IMS Health data.

Vytorin (ezetimibe and simvastatin), which both companies developed, had global sales of $4.6 billion last year, according to Merck financial data, but it has faced challenges, as the Food and Drug Administration warned last August that it had received reports of potentially fatal muscle damage in patients using simvastatin and the arrhythmia drug amiodarone, the active ingredient in Wyeth’s Cordarone and Upsher-Smith’s Pacerone. In December, the Wall Street Journal reported that Steven Nissen, a cardiovascular medicine specialist at the Cleveland Clinic and then-candidate for the post of FDA commissioner, had harmed Merck’s sales by calling the safety of Vytorin into question. And in January, an FDA review of a study comparing Vytorin to Merck’s Zocor (simvastatin) found no significant difference between the thickness of the walls in carotid arteries – an indication of the risk of cardiovascular disease – between patients taking Zocor and those taking Vytorin, though the Vytorin patients had lower LDL, or “bad” cholesterol.

One major reason for Pfizer’s acquisition of Wyeth was Wyeth’s strong OTC portfolio; Pfizer had sold its OTC division to Johnson & Johnson, which has since benefited, particularly as consumers tend to disproportionately use OTC products in a tough economy. Schering-Plough’s OTC division could similarly benefit Merck, with its high-selling products such as the Claritin (loratadine) line of antihistamines and the Miralax (polyethylene glycol) line of laxatives.

Since 2000, Merck has made three attempts to switch the anti-cholesterol drug Mevacor (lovastatin) to an OTC product, though this has run into resistance from the FDA, the most recent attempt occurring in 2007; the FDA issued a nonapprovable letter to Merck concerning the switch in January 2008 after an advisory committee voted against it. The committee cited a study indicating that while 98% of consumers appropriately chose not to take the medicine, only 16% of those who did used it appropriately, Drug Store News reported at the time.