The trend of merging pharmas continued Monday with Merck & Co. (NYSE:MRK) and Schering-Plough Corp. (NYSE:SGP) announcing they would
merge in a cash-and-stock deal worth $41.1 billion. The deal makes Merck the No. 2 drugmaker in the U.S. So what does that mean for competitors like Bristol-Myers Squibb Co. and GlaxoSmithKline plc?
Don't expect giant merger Monday news from GlaxoSmithKline, though. CEO Andrew Witty told Bloomberg
megamergers are a bad idea and that he likes being in consumer products. Witty made those comments a couple weeks before Pfizer Inc.'s $68 billion acquisition of rival Wyeth. What we should look for are
licensing deals and smaller acquisitions.
At Bristol-Myers, chairman and CEO James Cornelius has said, "We have a long list of
companies, compounds, technologies we'd like to acquire over the next couple of years, and we're convinced we'll do it." Bristol-Myers' cash hoard is largely the result of its $4.1 billion sale of wound-care division ConvaTec to Nordic Capital and Avista Capital LP. But as one analyst noted, while the cash puts Bristol-Myers in a position to make acquisitions, it could also make Bristol-Myers a takeover target.
As for Merck and Schering-Plough, here are a few points on the N.J.-based drugmakers' deal:
- They are already JV partners on cholesterol drugs Vytorin and Zetia (sales of those drugs dropped significantly last year).
- Will double the nine potential medicines Merck has in Phase 3 development.
- Merck shareholders will own 68% of the combined company.
- Will create annual savings of $3.5 billion after 2011.
- Will have cash and investments balance of about $8 billion.
- Merck's chairman and CEO Richard Clark will lead the combined company.
Of note to our CD community, Merck's integration team will be led by Adam Schechter, president of global pharmaceuticals, while Schering-Plough's integration team will be led by Brent Saunders, senior vice
president and president, consumer healthcare.
Another thing to look out for in this deal is price. A Bloomberg article quoted Caris & Co. analyst David Moskowitz saying, "
The price seems way too low. It's a tremendous deal for Merck. Every bank in the world should want to line up and fund this deal at this price. What makes Schering so attractive is the number of drugs in their pipeline and the lack of generic competition."
-
Baz HiralalSee the Merck deal announcementGo to the story
Join Corporate Dealmaker's LinkedIn forum
Juergen Lasowski
And the winners are...
