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New Merck & Co opens for business

Published on 05/11/09 at 01:26am

The new corporate entity formed by the Merck & Co/Schering-Plough merger has at last opened its doors for business.

The Schering-Plough name has been dropped, as the "new" Merck, formed in a $41 billion deal, begins trading.

No details have yet emerged on what the knock-on effect of this will be for the newly-enlarged company's European operations, in terms of sites, headcount or products.

But both companies have talked of making annual cost savings of $3.5bn after 2011, with marketing and administration, manufacturing and R&D hardest hit.

What is clear is that the new industry giant will challenge Pfizer in terms of sales and sheer scale, and the merger has been interpreted as Merck's response to increasingly touch trading conditions.

In March, analysts Datamonitor forecast that the merger should return Merck to positive sales growth and provide a raft of new pipeline and marketed products.

Datamonitor calculated that a standalone Merck's prescription pharma portfolio would see sales decline for 2008-13 at a compound annual growth rate (CAGR) of -0.3%.

Generic competition against drugs like Singulair, Cozaar/Hyzaar, Fosamax and Zocor would be largely to blame for this decline.

Despite new launches such as Isentress and Janumet, expiring products would have left Merck's 2013 sales $435 million below those of 2008.

Schering-Plough, by contrast, has a 2008-13 sales CAGR of 4.5% and is the fastest-growing big US player.

Thus the merger means Merck's 2008-13 sales CAGR will rise to +1.7%, concluded Datamonitor.

Led by chief executive Richard Clark, the new Merck wants to focus on growth in developing markets, vaccines and biologics.

Its five divisions are global human health (GHH), consumer health care, animal health, Merck Research Laboratories (MRL) and Merck Manufacturing.

The completion of the merger has been widely trailed: in September Merck offloaded its interest in animal health products company Merial to Sanofi-Aventis for $4 billion to allow the deal to go through.

The new company's stock will be traded on the New York Stock Exchange and Schering-Plough shareholders are set to receive 0.5767 shares of the new company and $10.50 in cash for each share of Schering-Plough. Each share in Merck will automatically become a share of the newly combined company.

Clearance from regulatory authorities in China and Mexico had been the most recent hurdles for the merger to overcome.

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