Schering and Bayer forge strategic partnership
pharmafile | September 14, 2004 | News story | |Â Â Â
Schering-Plough and Bayer have formed a strategic sales and marketing partnership aimed at reviving their struggling businesses in the major markets.
Both businesses have suffered a number of body blows over the last two to three years. Bayer is still recovering from the withdrawal of statin Baycol in 2001 over safety concerns, and suffered record losses of E1.2 billion last year as it battled to restructure and cut overheads.
Meanwhile, Schering's share price has suffered under an onslaught of generic competition and government investigations into its financial reporting and sales practices.
In the absence of cash resources to bolster their businesses, the alliance is a necessary step to help both companies improve their profitability and penetration of the world's leading markets, the US, Japan and Europe.
In the US and Puerto Rico, Schering will gain exclusive rights to market and sell Bayer antibiotics Avelox (moxifloxacin hydrochloride) and Cipro (ciprofloxacin hydrochloride), cardiovascular drug Adalat (nifedipine) and other smaller, established primary care products, for which Schering will pay Bayer a substantial royalty based on net sales.
Schering will also jointly manage and share profits with GSK for erectile dysfunction product Levitra, under Bayer's existing global co-promotion agreement.
Meanwhile in Japan, Bayer's established relationships with cardiovascular specialists will be exploited with a co-marketing of Schering's cholesterol drug Zetia (ezetimibe), currently under regulatory review in Japan. The agreement will not cover Zetia combination products such as the ezetimibe/simvastatin 2-in-1 cholesterol pill Vytorin, launched in the US in July.
As a result of the agreement a substantial number of Bayer's best sales reps and marketing people will be integrated into Schering's US and Puerto Rico organisations, strengthening its primary care presence in the world's most important market.
Hailing the agreement, Fred Hassan, Schering-Plough chairman and chief executive said it was a further step in building the "new Schering-Plough".
"The collaboration will enhance our primary care product line and complement our respiratory franchise. We anticipate that it will also strengthen our presence in Japan through the co-marketing of Zetia with Bayer in this key cardiovascular market, pending approval by Japanese authorities."
The agreement coincides with Schering's announcement of plans to develop a global oncology business and Bayer will help this effort by promoting Schering cancer products in the US and Europe.
One drawback for Schering could be the agreement's stipulation restricting the marketing of any products competing with Bayer's quinolone antibiotic Avelox. This could force the company to sub-license Toyama's garenoxacin, for which it entered into an agreement in June.
Schering says the deal will make a small positive contribution to its earnings per share in the long-term after taking a small hit during a transition period lasting until the end of 2004.
For Bayer, the collaboration allows it to divert funds to other parts of its business, including the expansion of its consumer health business with the planned acquisition of Roche's consumer division.
"The alliance with Schering-Plough will take advantage of the regional strengths of both companies," said Werner Wenning, chairman of the board of Bayer.
"It will help us adapt cost structures and resources in the United States to meet our strategic financial objectives and better exploit the potential of our products and, at the same time, further expand our business in Japan."
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