It seems Merck & Co.'s (NYSE:MRK)
$41.1 billion acquisition of Schering-Plough Corp. (NYSE:SGP) can't come soon enough -- if, that is, the deal delivers on its promise. Merck saw profit plummet 56% in the
first quarter as drug sales dropped, including revenue generated by the cholesterol drugs Zetia and Vytorin. Merck and Schering-Plough share revenue from those drugs, whose sales were hurt after a study questioned if they were any more effective than an older, cheaper pill.
Still, with several of its own patents due to expire in coming years, Merck wants Schering-Plough to help load its pipeline and expand into cancer, neurology and into emerging markets such as
China, where the target has a small, wholly owned skin-care business and drugs in several therapeutic areas. In addition to adding Schering-Plough's drugs to its portfolio, Merck foresees cost savings of about $3.5 billion annually.
Generating revenue from Schering-Plough drugs in development is where the greatest upside lies for Merck. But with longer and more expensive lead times for drug approval and with competition among pharmaceutical firms escalating, boosting revenue from new drugs may well be the most difficult benefit of a Merck-Schering-Plough merger to achieve.
- Suzanne Stevens
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