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Merck Buying Rival Schering-Plough

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By LINDA A. JOHNSON

The Associated Press

Published: March 10, 2009

TRENTON, N.J. - Merck & Co. is buying Schering-Plough Corp. for $41.1 billion in a deal that gives Merck key new businesses, access to a promising pipeline of new products and the chance to cut costs by $3.5 billion more per year, including eliminating about 16,000 jobs.

Merck hopes the cash-and-stock deal helps it better compete in a drug industry facing slumping sales, tough generic competition and intense pricing pressures.

The deal announced Monday would unite the maker of asthma drug Singulair with the maker of allergy medicine Nasonex and form the world's second-largest prescription drug maker. Merck and Schering are already partners in a pair of popular cholesterol fighters, Vytorin and Zetia, although concerns about their safety and effectiveness have hurt sales for the past year.

Shares of the two companies traded furiously after the announcement - more than three times the normal daily volume of Schering-Plough shares had changed hands barely an hour after the market opened.

Schering shares jumped $2.50 to close at $20.13 and Merck shares plunged about 8 percent to $20.99, down $1.75.

The latest deal comes only a few weeks after Pfizer agreed to pay $68 billion for Wyeth.

Merck is a top maker of pills and vaccines, and acquiring Schering-Plough will give it products and expertise in the prized area of biologic drugs, which are made from living cells. It will also give Merck one of the world's biggest animal health businesses and a sizable consumer health division that includes products such as allergy pill Claritin, Dr. Scholl's foot products and the Coppertone sun care line.

Still, analyst Steve Brozak of WBB Securities said the deal is mainly about Merck "buying revenue and buying earnings."

"It's a good short-term fix, but it unfortunately makes it more complicated for the long term," Brozak said.

He said it will now be more difficult for Merck to continue its strategy of buying or licensing the few promising experimental compounds available from small biotech companies, many of which are on the verge of shutting down amid the recession and credit crunch.

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