Schering-plough May Pay Off Before Mercks Patent Losses Hurt
The purchase of Schering-Plough, of Kenilworth, New Jersey, for $41.1 billion in cash and stock gives Merck new products for cancer, immune diseases and psychiatric disorders. It also awards Merck, of Whitehouse Station, New Jersey, full control of revenue from the cholesterol pills Zetia and Vytorin, which it now shares with Schering-Plough.
Mercks $4 billion-a-year asthma drug Singulair will face generic competition by 2012. By then, Schering-Plough has said it plans to file for approval of seven drugs, each with more than $1 billion in peak annual sales. One of the experimental medicines is a blood thinner that may help 20 million Americans.
“What makes Schering so attractive is the number of drugs in their pipeline and the lack of generic competition,” said David Moskowitz, an analyst with Caris & Co., in a telephone interview. “Its a tremendous deal for Merck.”
Schering-Ploughs biggest sellers arent nearing patent expiration. The company is developing the blood thinner for heart patients, a schizophrenia drug, the once-a-month injected arthritis medicine golimumab, a treatment that reverses anesthesias side effects, and anti-viral remedies for hepatitis C and other infectious diseases.
The deal between the two New Jersey-based drugmakers “is about the science,” said Merck Chief Executive Officer Richard Clark in a conference call with investors.
Blood-Thinner Study
Schering-Plough is nearly finished with a study for its blood thinner, dubbed TRA, and plans to seek regulatory approval in 2010 or 2011. The medicine is designed to prevent clots without boosting the risk of bleeding, a major drawback of existing drugs for heart patients.
The medication could compete against Plavix from New York- based Bristol-Myers Squibb Co. and Paris-based Sanofi-Aventis SA. Plavix is the worlds second-biggest drug with more than $8 billion in annual sales.
Prasugrel, made by Eli Lilly & Co., of Indianapolis, Indiana, and Tokyo-based Daiichi Sankyo Co., won the backing of a Food and Drug Administration advisory panel last month for patients getting artery-clearing procedures, and other companies are experimenting with treatments to prevent clots with less bleeding than Plavix or prasugrel.
Merck also would gain Schering-Ploughs best-selling drug, the anti-inflammatory medicine Remicade, which it markets outside the U.S., and a successor known as golimumab. Schering- Plough collaborates on both drugs with Johnson & Johnson, of New Brunswick, New Jersey.
J&J Factor
Schering-Plough filed for European approval of golimumab a year ago and has predicted peak sales of more than $1 billion.
Buying Schering-Plough also gives Merck full control of the cholesterol pills Zetia and Vytorin, whose sales plummeted in 2008 after a study questioned whether they were better than an older generic drug at unclogging heart arteries. The companies plan a combination of Zetia, which lowers the bodys absorption of cholesterol, with Pfizer Inc.s Lipitor after that medicine loses patent protection in 2011.
Schering-Ploughs biggest selling drugs have patent protection until the middle of the next decade, said Thomas Koestler, president of the companys research institute, in a briefing last year. That means its experimental products will generate extra revenue, rather than replacing sales lost to competitors, he said.
No Guarantee
The experimental drugs arent guaranteed successes.
The FDA rejected Schering-Ploughs sugammadex, also known as Bridion, in August because of allergic reactions and other side effects. The injected medicine to reverse anesthesia is approved in Europe. Schering-Plough got the drug as part of its $16.1 billion purchase of Akzo Nobel NVs Organon BioSciences unit in 2007.
The FDA also asked for more information about a schizophrenia drug Schering-Plough is developing called Saphris. Schering-Plough answered the agency last month. The drug, which the company said is another potential $1 billion seller, would compete with Johnson & Johnsons Risperdal, Eli Lilly & Co.s Zyprexa, AstraZeneca Plcs Seroquel and Bristol-Myers Squibb Co.s Abilify in the $16.2 billion a year market for schizophrenia treatments.