Merck & Co. (NYSE:MRK) closed its $41.1 billion acquisition of Schering-Plough Corp. (NYSE:SGP). The deal makes Merck the
world's No. 2 drugmaker behind industry juggernaut Pfizer Inc. (NYSE:PFE), which
had its own Day One on Oct. 16 after its $68 billion acquisition of Wyeth.
Now that Merck and Schering-Plough can operate as a single company, their scientists can begin sharing research and ideas, which many must be excited about. Many, however, are likely skittish about possible layoffs. The combined company will axe about 15% of the workforce. Some people are pretty set, though. Last month, about 300 executives from Merck and Schering-Plough were named to country leadership positions to help manage the transition.
Here are a few merger numbers to chew on: Whitehouse Station, N.J.'s Merck, now with about 106,000 employees, will generate more than 50% of its revenue outside the U.S. It expects EPS growth in the high-single digits until 2013 -- a year it is also targeting free cash flow to be about $15 billion. Merck also expects to achieve cost savings of about $3.5 billion annually beyond 2011, which are expected to come from all areas across the combined company.
As of the close, Merck started reorganizing into five main units, with animal health and consumer healthcare operating as separate business units. The other divisions are global human health, manufacturing and Merck Research Laboratories. The combined company said in August it will also create new franchises focused on Women's Health and Endocrine, and Mature Brands.
Going forward, don't expect Merck to hold back on licensing deals and acquiring smaller drugmakers, research chief Peter Kim is keen on keeping "
investment opportunities front and center."
Fitch Ratings Service expects the company's
revenue to fall next year after the patent on the blood pressure drug Cozaar expires, but it expects growth in the following years. Merck of course is not alone in trying to hedge against the patent cliff. According to a Deloitte report, the fact that drugs representing more than $74 billion
in sales will lose patent protection by 2012 is also driving a new trend of
later-stage mergers.
Merck expects the transaction to be modestly accretive in 2010.
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Baz HiralalSee the Merck-Schering announcementSee previous post on Pfizer-Wyeth Day One
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