Merck & Company has announced that it would acquire Schering-Plough for $41.1 billion. The announcement was made Monday. It is the second megadeal in the pharmaceutical industry in a matter of weeks after Pfizer announced the purchase of Wyeth in January.
The Merck acquisition will unite the makers of cholesterol drugs Zetia and Vytorin. The two New Jersey-based drugmakers have both been streamlining their operations to become more efficient due to setbacks to Vytorin and Zetia, whose combined fourth-quarter sales slumped 26 percent.
It will also double the number of drugs Merck has in development to 18 and bolster their portfolio of medicines to include cardiovascular, respiratory, oncology, neuroscience and infectious disease.
"It seems somewhat inevitable," said analyst Jeffrey Holford of Jefferies in London, referring to an industry trend. "The industry needs to shrink because there is just not the same market for branded pharmaceuticals going forward as there has been over the last 10 years. There is overcapacity, and (the two companies) need to take each other's capacity out of the market."
Merck Chief Executive Richard Clark will head the combined entity, with Merck shareholders owning about 68 percent. Merck, which said it would maintain its dividend, expects the deal to add modestly to operating earnings in the first full year following completion and "significantly" after that.