Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Biotech / Medical : Pharma News Only (pfe,mrk,wla, sgp, ahp, bmy, lly) -- Ignore unavailable to you. Want to Upgrade?

To: Henry Niman who wrote (355)	6/19/1998 11:44:00 AM
From: Anthony Wong	Respond to of 1722

Astra to Buy Merck's Half of Unit for $4.4 Bln-Plus (Update1) Bloomberg News June 19, 1998, 9:33 a.m. ET Astra to Buy Merck's Half of Unit for $4.4 Bln-Plus (Update1) (Adds analyst comment in 4th paragraph; rewrites.) Stockholm, June 19 (Bloomberg) -- Astra AB said it will buy Merck & Co.'s half of their U.S. sales venture for at least $4.4 billion, paving the way for Sweden's biggest drugmaker to consider merging with a rival. Astra, maker of Prilosec, an ulcer treatment that is the world's best-selling drug, said it will lend the biggest U.S. drugmaker $1.4 billion as part of the transaction. The $4.4 billion minimum price depends on future sales. The buyout extricates Astra from a requirement to sell its products in the U.S. through Merck -- an arrangement that analysts say crimps the Swedish company's profit in the world's biggest drug market. Merck, maker of the cholesterol drugs Zocor and Mevacor, agreed last month to sell its stake in a venture with DuPont Co. for $2.6 billion, giving it cash to expand. ''Merck would have preferred all the money in cash,'' said Hemant Shah, an analyst with HKS & Co. in Warren, New Jersey. ''That's not realistic if Astra is trying'' to merge. If Astra does merge or is acquired, Merck will continue to receive money under today's agreement. Merck also would have the right to new Astra products after any merger, or could instead receive between $675 million and $1.5 billion, Astra said. Savings for Astra The Swedish company said the transaction will give it cost savings of $100 million per year by 2000 and will boost earnings from that year. Whitehouse Station, New Jersey-based Merck will receive revenue from the venture for at least 10 years based on Astra's current and future U.S. product sales. The price was lower than analysts expected. Seven analysts surveyed this month by Bloomberg News said Astra would likely pay a total of between $10 billion and $15 billion. ''That would have been very difficult for Astra to digest,'' said Shah. ''With that kind of debt, they would never have found a partner.'' Astra said June 5 it was in talks to change the Merck venture. The announcement, the timing of which was a surprise, came as Swedish markets were closed for a national holiday. Astra shares closed down 1.5 kronor in Stockholm yesterday, at 161.5. American depositary receipts of Astra, the world's 15th-largest drug company, closed last night at 20 1/2, down 1/8. Merck closed 1 1/8 higher at 128 7/8 in New York. Profits for Merck The U.S. company said it expects the transaction ''to yield more revenue and income'' than it would have received under the previous venture. It said Astra has the right to buy out Merck's future product sales through the venture in 2008, 2012 or 2016, except for Prilosec and perprazole, another ulcer drug, which would be extended until 2017. Astra's chief executive, Haakan Mogren, said three months ago the company is looking for a merger partner of a similar size, such as Zeneca Group Plc, Schering-Plough Corp. or Bayer AG. Analysts say a U.S. partner is more likely, since Astra needs to bolster its presence in the U.S., where more than 38 percent of the world's drugs are sold. The drug industry has seen a wave of consolidation in recent years as companies seek to maintain profits in the face of cost- cutting by government and private health insurers. Astra Merck Inc. was formed in November 1994, when Astra paid $820 million to reclaim half of the rights to sell its drugs in the U.S. Merck had acquired those rights for $60 million in 1982, just as Losec was coming to market. --Sandy Hendry in the Stockholm bureau (46 8) 610 0700, and Dane