The latest combination comes only a few weeks after Pfizer Inc. announced it has agreed to pay $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 cuts costs.
"This is a uniquely complementary match," Merck Chairman and CEO Richard Clark told The Associated Press.
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 $47 billion in revenue in 2008, nearly as much at the largest drugmaker, Pfizer Inc., which posted $48.42 billion. Pfizer is in the midst of acquiring Wyeth, which would add more than $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 NV, has about 50,800 employees.
"There'll be no immediate changes" to staffing levels, Merck spokeswoman Amy Rose told The Associated Press. "Eventually, we anticipate an approximate 15 percent reduction in the combined company's headcount," implying nearly 16,000 fewer jobs.
Schering-Plough's shareholders will get $10.50 in cash and 0.5767 Merck shares for each Schering-Plough share they own. That's a 34 percent premium to Schering-Plough's closing stock price on Friday.
The two New Jersey pharmaceutical companies said that 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.
The transaction is to be structured as a reverse merger. As a result, Schering-Plough will be the surviving corporation but will be take the name Merck. The new company will be based at Merck's sprawling headquarters in Whitehouse Station, N.J., but said that the "substantial majority" of employees of Kenilworth, N.J.-based Schering-Plough will remain with the combined company.
"There's a variety of reasons," for the reverse merger, Rose said. She said the specifics would be discussed during a conference call.
Hassan will participate in planning integration of the two companies until the close of the deal, which is expected in the fourth quarter.
"We were on a strong growth path on our own," Hassan said. "When Dick approach me in December, it coincided with a rapidly changing macroenvironment," a reference to the industry's structural problems and the global recession.
"This deal made a lot of sense for our shareholders," he added, given a more than 300 percent increase in dividends to Schering-Plough shareholders, a comparable stream of earnings-per-share growth and the 44 percent premium over the two companies' average closing share prices over the past 30 trading days.
Hassan said he has not yet decided what he will do after the merger, but, "I'm looking forward to new challenges" and will be available if Clark needs his help.
Merck's sales fell 3 percent in the fourth quarter, at $6 billion, while Schering-Plough's rose 17 percent to $4.35 billion, mainly because of Organon's products.
The companies said this will improve their finances, giving them annual cost savings of about $3.5 billion each year after 2011, and will boost earnings per share in the first full year after the deal closes.
Morey money-related links:
CLICK HERE to follow Action News on Twitter
CLICK HERE to get Action News on your website
CLICK HERE to find Action News on Facebook
