- Combined Company Positioned for Sustainable Growth Through Scientific Innovation and a Stronger, More Diversified Product Portfolio
- Powerful Joint R&D Pipeline with Strong Candidates in All Development
- Phases Doubles the Number of Late-Stage Compounds to 18Broader Product Portfolio in Critical Therapeutic Areas
- Expanded Global Presence Including High-Growth Emerging Markets
- Expected to be Significantly Accretive, Increase Efficiencies and Result in Cost Savings of Approximately $3.5 Billion Annually
- Merck Committed to Maintain Current Dividend
Merck & Co., Inc. (NYSE: MRK) and Schering-Plough Corporation (NYSE:
SGP) today announced that their Boards of Directors have unanimously
approved a definitive merger agreement under which Merck and
Schering-Plough will combine, under the name Merck, in a stock and cash
transaction. Under the terms of the agreement, Schering-Plough
shareholders will receive 0.5767 shares and $10.50 in cash for each
share of Schering-Plough. Each Merck share will automatically become a
share of the combined company. Merck Chairman, President and Chief
Executive Officer Richard T. Clark will lead the combined company.
Based on the closing price of Merck stock on March 6, 2009, the
consideration to be received by Schering-Plough shareholders is valued
at $23.61 per share, or $41.1 billion in the aggregate. This price
represents a premium to Schering-Plough shareholders of approximately 34
percent based on the closing price of Schering-Plough stock on March 6,
2009. The consideration also represents a premium of approximately 44
percent based on the average closing price of the two stocks over the
last 30 trading days.
Upon closing of the transaction, Merck shareholders are expected to own
approximately 68 percent of the combined company, and Schering-Plough
shareholders are expected to own approximately 32 percent. Merck
anticipates that the transaction will be modestly accretive to non-GAAP
EPS1 in the first full year following completion and
significantly accretive thereafter.
“We are creating a strong, global healthcare leader built for
sustainable growth and success,” said Mr. Clark. “The combined company
will benefit from a formidable research and development pipeline, a
significantly broader portfolio of medicines and an expanded presence in
key international markets, particularly in high-growth emerging markets.
The efficiencies we gain will allow us to invest in strategic
opportunities, while creating meaningful value for shareholders.
“We look forward to joining forces with an outstanding partner we know
well and that shares our commitment to patients, employees and the
communities where we work and live. Through their talent and dedication,
Schering-Plough employees have built an industry leading R&D engine and
late-stage pipeline that is complementary to our own. We are confident
that, together, Merck and Schering-Plough will make a meaningful
difference in the future of global healthcare,” Mr. Clark added.
Fred Hassan, chairman and chief executive officer of Schering-Plough,
said, “Over the last six years, Schering-Plough colleagues have
transformed our company into a strong competitor in the global
pharmaceutical industry. We have built a strong, diverse business and a
robust pipeline that offers hope to patients who are waiting for new
medicines. I am proud of what we have accomplished. Our success is a
testament to the hard work and dedication of our colleagues in every
country. We are joining forces with Merck, our long-term partner in our
cholesterol joint venture, to create a dynamic new leader in the
pharmaceutical industry. By harnessing the strengths of both companies,
the combined entity will be well-positioned to further deliver on our
shared goal of discovering new therapies for patients to help them live
healthier, happier lives.”
“The talent and dedication of Schering-Plough scientists has helped to
build an outstanding clinical development pipeline,” said Peter S. Kim,
Ph.D., Merck executive vice president, and president of Merck Research
Laboratories. “Schering-Plough's considerable biologics expertise will
complement Merck's novel proprietary biologics platform and aligns with
our commitment to build a powerful biologics presence. The
Schering-Plough and Merck pipelines are remarkably complementary and
will greatly increase our ability to deliver important new medicines to
patients. I believe the combined pipeline will be the best in the
industry, by far.”
Strategic Benefits of the Transaction
Complementary Product Portfolios and Pipelines Focused on Key Therapeutic Areas: The combination significantly broadens Merck’s portfolio of medicines — an engine for consistent, sustainable growth — driven in part by the addition of valuable products with long periods of exclusivity. By leveraging the combined company’s expanded product offerings, Merck expects to benefit from additional revenue growth opportunities. For example, the combined company will have expanded opportunities for life-cycle management through the introduction of potential new combinations and formulations of existing products. In addition, Merck and Schering-Plough together have high-potential early-, mid- and late-stage pipeline candidates. The transaction will double the number of potential medicines Merck has in Phase III development, bringing the total to 18. The combined company will have a more diverse portfolio across important therapeutic areas, including cardiovascular, respiratory, oncology, neuroscience, infectious disease, immunology, women’s health and other areas:
Cardiovascular: This transaction reinforces Merck’s 50-year
commitment to the cardiovascular therapeutic area. The
consolidation of the cholesterol drugs ZETIA (ezetimibe) and
VYTORIN2 (ezetimibe/simvastatin) into Merck's
cardiovascular portfolio will simplify the combined company’s
approach to the cardiovascular market and create new opportunities
to leverage the cholesterol franchise through new medicine
combinations. Finally, theaddition of Schering-Plough’s
Thrombin Receptor Antagonist, a potential first-in-class
antiplatelet therapy, among other late-stage development
candidates, further complements Merck's Phase III cardiovascular
development portfolio and will position the combined company to
continue offering meaningful products for patients in this
important therapeutic area.
Respiratory: The combination with Schering-Plough expands
Merck’s strong respiratory franchise with multiple complementary
products, including those for the treatment of asthma and allergic
rhinitis.
Oncology: Schering-Plough’s current oncology products will
enable Merck to expand its presence in this area and provide the
necessary foundation to take advantage of the combined company’s
promising pipeline.
Neuroscience: Schering-Plough’s strong R&D capabilities in
this area complement Merck’s ongoing neuroscience development
efforts, which include both migraine and sleep product candidates.
In addition to the two companies’ currently marketed neuroscience
products, Schering-Plough brings several promising late-stage
candidates, including SAPHRIS (asenapine), an antipsychotic drug
for the treatment of schizophrenia and bipolar disorder, and
BRIDION (suggamadex), a novel anesthesia reversal agent.
Infectious Disease: Schering-Plough and Merck have
complementary efforts in infectious disease. The combined company
will leverage the scientific and commercial strengths of both
Schering-Plough and Merck in the treatment of Human
Immunodeficiency Virus (HIV) and Hepatitis C Virus (HCV).
Schering-Plough's strong portfolio of HCV candidates, including
boceprevir, is well-aligned with Merck's programs in this critical
disease area.
Immunology: Schering-Plough brings distribution rights
outside the United States to REMICADE (infliximab), its
well-established biologic product for inflammatory/immunological
diseases, and SIMPONI (golimumab), which was filed in Europe in
March 2008, as well as a number of other promising products in
development.
Women’s Health: Merck expects to benefit from a solid
portfolio of women’s health products including GARDASIL [human
papillomavirus quadrivalent (types 6, 11, 16 and 18) vaccine,
recombinant], a broad range of contraceptive options and biologic
and small molecule fertility drugs, which will allow it to
strengthen relationships with women’s healthcare providers.
Other Areas: Schering-Plough brings to the combined company
a leading Animal Health business with strength in vaccines and
small molecules, as well as many attractive consumer health brands
such as CLARITIN, COPPERTONE, DR. SCHOLL’S and MIRALAX.
Robust R&D to Deliver Innovative Medicines for Patients: Merck
and Schering-Plough both have proven track records of breakthrough
research and scientific discovery. The combined company will have a
product pipeline with greater depth and breadth, and numerous
promising drug candidates. With greater resources, the combined
company will have the financial flexibility to invest in these
candidates as well as external R&D opportunities and to build on the
strong legacies of both companies.
Stronger Commercial Organization: Both Merck and
Schering-Plough have proven teams of talented and experienced
employees with strong customer relationships. The progress Merck and
Schering-Plough have made in implementing new customer-centric selling
models will help ensure the smooth and efficient integration of the
two commercial operations. The combined company's broader product
portfolio will help its sales force to be more effective, increasing
its ability to help physicians and healthcare systems improve patient
outcomes. Schering-Plough brings key advantages to Merck through its
focus on specialty therapeutic areas and its strength in international
markets.
Expanded Global Presence with Geographically Diverse Revenue Base:
Schering-Plough generates about 70 percent of its revenue outside of
the United States, including more than $2 billion in annual revenue
from emerging markets. This will dramatically accelerate Merck's own
international growth efforts, including the company's goal of reaching
top five market share in targeted emerging markets. The combined
company will have an industry-leading global team of marketing and
sales professionals. In addition, with a more geographically diverse
mix of business, the combined company is expected to generate more
than 50 percent of its revenue3 outside the United States.
Increased Manufacturing Capabilities: The combined
manufacturing operations of Merck and Schering-Plough will
considerably increase manufacturing capabilities, adding more capacity
to support anticipated growth in biologics and sterile medicines.
Merck will achieve even greater synergies by applying its lean
manufacturing and sourcing strategies to the expanded operations.
Financial Benefits of the TransactionStrong Financial Profile: The combined 2008 revenues3 of the two companies totaled $47 billion. Post-transaction, the
combined company will have a strong balance sheet with a cash and
investments balance of approximately $8 billion. Merck believes it
will maintain its current credit ratings. In addition, the combined
company’s broad product portfolio is expected to generate robust cash
flow.
Commitment to Maintain Merck Dividend: Merck’s Board of
Directors is committed to maintaining the dividend at the current
level following the closing of the transaction. Merck currently pays
an annual dividend of $1.52 per share, which, on an as-converted
basis, represents a three fold increase for Schering-Plough
shareholders. In addition, the combined company will continue Merck’s
share repurchase program after the closing of the transaction.
Substantial Cost Savings: Merck expects to achieve substantial
cost savings of approximately$3.5 billion annually beyond 2011.
These cost savings are expected to come from all areas across the
combined company and from the full integration of the
Merck/Schering-Plough Pharmaceuticals cholesterol joint venture. These
cost savings are in addition to the previously announced ongoing cost
reduction initiatives at both companies.
Accretive to Earnings: The transaction is anticipated to be
modestly accretive to non-GAAP EPS¹ in the first full year following
completion and significantly accretive thereafter.
Ability to Optimize Investments for Maximum Benefit: The
substantial cost savings expected to be achieved through this
combination will be allocated to the best investment opportunities,
including pipeline candidates with the greatest probability of
success, as well as licensing opportunities. By optimizing its
investments, the combined company will maximize the benefits of
strategic growth initiatives and R&D efforts to solidify its position
at the forefront of innovation and enhance its scientific and
technological leadership.
Leadership and Integration
Following the close of the transaction, the Board of Directors of the
combined company will be comprised of the Merck Board and three
representatives from Schering-Plough’s Board. Richard T. Clark will
serve as chairman, president and chief executive officer of the combined
company. Fred Hassan, chairman and chief executive officer of
Schering-Plough, is committed to continuing the strong operations at
Schering-Plough and intends to participate in the integration planning
until the close.
Merck’s integration team will be led by Adam Schechter, president of
Global Pharmaceuticals, who will report to Mr. Clark. Schering-Plough’s
integration team will be led by Brent Saunders, senior vice president
and president, Consumer Health Care, who will report to Mr. Hassan. A
key priority is keeping the best talent from both companies. Recognizing
that the combination will result in a much larger organization, Merck
expects that the substantial majority of Schering-Plough employees will
remain with the combined company. In addition, both Merck and
Schering-Plough will institute hiring freezes immediately.
The combined company will have its corporate headquarters in Whitehouse
Station, NJ.
Financing
The aggregate consideration will be comprised of a combination of
approximately 44 percent cash and 56 percent stock. The cash portion
will be financed with a combination of $9.8 billion from existing cash
balances and $8.5 billion from committed financing to be provided by
J.P. Morgan.
Transaction Structure
The transaction will be structured as a "reverse merger" in which
Schering-Plough, renamed Merck, will continue as the surviving public
corporation. The exchange ratio was calculated based on an agreed price
of $26.25, with $10.50 in cash and $15.75 in Merck stock, based on a
trailing thirty day volume weighted average price of $27.3109. Effective
upon the merger, each Merck share will automatically become a share of
the combined company. The receipt of shares by Schering-Plough
shareholders and the conversion of Merck shares into combined company
shares under the transaction is intended to be tax free for U.S.
federal income tax purposes. Schering-Plough shareholders will be
subject to tax on the cash received up to the amount of gain realized on
the shares exchanged.
Guidance
Merck reaffirmed its expectations for full-year 2009 revenue (as
reported by Merck & Co., Inc.) to be in the range of $23.7 billion to
$24.2 billion. As previously disclosed, based on current information,
revenues are likely to be in the lower half of the range. The company
also reiterated its expectations for 2009 non-GAAP EPS to range from
$3.15 to $3.30, excluding certain items, and a 2009 GAAP EPS range of
$2.95 to $3.17. The 2009 GAAP EPS guidance includes a pretax charge of
approximately $400 million to $600 million associated with the company's
global restructuring program. This guidance excludes any impact from
this transaction, which is expected to close in the fourth quarter.
Merck is targeting a high single digit non-GAAP EPS1 compound
annual growth rate from 2009 (2009 base represents Merck's stand alone
non-GAAP EPS guidance) to 2013. Additionally, in 2013, Merck is
targeting pretax margins¹ to be nearly 40 percent and free cash flow to
be approximately $15 billion. In light of the announced transaction,
Merck today provided 2013 guidance that supersedes previously provided
2010 stand-alone guidance.
Approvals and Time to Close
The transaction is subject to approval by Merck and Schering-Plough
shareholders and the satisfaction of customary closing conditions and
regulatory approvals, including expiration or termination of the
applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, as well as clearance by the
European Commission under the EC Merger Regulation and certain other
foreign jurisdictions. Merck and Schering-Plough expect to complete the
transaction in the fourth quarter of 2009.
Advisors
J.P. Morgan acted as financial advisor and Fried, Frank, Harris, Shriver
& Jacobson LLP acted as legal advisor to Merck. Goldman, Sachs & Co. and
Morgan Stanley acted as financial advisors and Wachtell, Lipton, Rosen &
Katz acted as legal advisor to Schering-Plough.
Conference Call and Webcast
Merck and Schering-Plough will host a conference call today, March 9,
2009, at 8:30 a.m. EDT. To access the call, please dial 800-399-0127
(international: +44 (0) 1452 589 088) and reference conference ID number
89050874. A replay of the conference call will be available as soon as
practicable following the end of the call until March 23, 2009 at 11:59
p.m. EDT. To access the rebroadcast, please dial 800-642-1687
(international: 706-645-9291) and reference conference ID number
89050874. In addition, an audio webcast of the call will be available
live and will be archived on the investor relations portions of both
companies’ Web sites at www.Merck.com
and www.Schering-Plough.com,
respectively, as well as on the joint Web site launched by the companies
this morning, www.ANewMerck.com.
B-Roll Information
Broadcast quality video downloads of Richard T. Clark, Merck’s chairman,
president and chief executive officer, are available at www.ANewMerck.com/media.
Mr. Clark provides an overview of the transaction and he discusses the
combined company’s product portfolio, the research capabilities of the
expanded organization and the compelling nature of the combination.
Satellite Uplink for Merck B-Roll
Availability on Monday, March 9, 2009
Feed Time:
9:00 - 9:15 AM ET (DEDICATED)
Coordinates:
C-BAND: AMC 3/TRANSPONDER 14 / AUDIO 6.2 & 6.8 / DOWNLINK: 3980 (V)
Feed Time:
1:30 - 1:45 PM ET (DEDICATED)
Coordinates:
C-BAND: AMC 3/TRANSPONDER 14 / AUDIO 6.2 & 6.8 / DOWNLINK: 3980 (V)
Feed Time:
3:00 - 3:15 PM ET (DEDICATED)
Coordinates:
C-BAND: AMC 3/TRANSPONDER 14 / AUDIO 6.2 & 6.8 / DOWNLINK: 3980 (V)
If you have questions or problems with the B-Roll satellite feeds, call
(212)-812-7134.
About Merck
Merck & Co., Inc. is a global research-driven pharmaceutical company
dedicated to putting patients first. Established in 1891, Merck
currently discovers, develops, manufactures and markets vaccines and
medicines to address unmet medical needs. The company devotes extensive
efforts to increase access to medicines through far-reaching programs
that not only donate Merck medicines but help deliver them to the people
who need them. Merck also publishes unbiased health information as a
not-for-profit service. For more information, visit www.merck.com.
About Schering-Plough
Schering-Plough is an innovation-driven, science-centered global health
care company. Through its own biopharmaceutical research and
collaborations with partners, Schering-Plough creates therapies that
help save and improve lives around the world. The company applies its
research-and-development platform to human prescription, animal health
and consumer health care products. Schering-Plough's vision is to “Earn
Trust, Every Day” with the doctors, patients, customers and other
stakeholders served by its colleagues around the world. The company is
based in Kenilworth, N.J., and its Web site is www.schering-plough.com.
1. Excludes purchase-accounting adjustments, restructuring
costs, acquisition-related costs and certain other significant items.
2. ZETIA and VYTORIN are currently sold through Merck’s and
Schering-Plough’s joint venture, Merck/Schering-Plough Pharmaceuticals.
3. Reflects Merck and Schering-Plough reported 2008 sales
plus 100 percent of the sales of the MSP joint venture.
Forward-Looking Statements
This communication contains “forward-looking statements” as that term is
defined in the Private Securities Litigation Reform Act of 1995. These
statements are based on both Merck’s and Schering-Plough’s managements
current expectations and involve risks and uncertainties, which may
cause results to differ materially from those set forth in the
statements. The forward-looking statements may include statements
regarding product development, product potential or financial
performance. No forward-looking statement can be guaranteed, and actual
results may differ materially from those projected. Merck and
Schering-Plough undertake no obligation to publicly update any
forward-looking statement, whether as a result of new information,
future events or otherwise. Forward-looking statements in this
presentation should be evaluated together with the many uncertainties
that affect either companies’ business, particularly those mentioned in
the risk factors and cautionary statements set forth in Item 1A of
either companies’ 10-K for the year ended December 31, 2008, and in
their periodic reports on Form 10-Q and Form 8-K, which the companies
incorporate by reference.
These reports are available at www.merck.com
and www.schering-plough.com.
Additional Information
In connection with the proposed transaction, Schering-Plough will file a
registration statement, including a joint proxy statement of Merck and
Schering-Plough, with the Securities and Exchange Commission (the
“SEC”). Investors are urged to read the registration statement and joint
proxy statement (including all amendments and supplements to it) because
they will contain important information. Investors may obtain free
copies of the registration statement and joint proxy statement when they
become available, as well as other filings containing information about
Merck and Schering-Plough, without charge, at the SEC’s Internet site (www.sec.gov).
These documents may also be obtained for free from Schering-Plough’s
Investor Relations web site (www.schering-plough.com)
or by directing a request to Schering-Plough Investor Relations at (908)
298-7436. Copies of Merck’s filings may be obtained for free from
Merck’s Investor Relations Web Site (www.merck.com)
or by directing a request to Merck’s Office of the Secretary at (908)
423-1000.
Merck and Schering-Plough and their respective directors and executive
officers and other members of management and employees are potential
participants in the solicitation of proxies from Merck and
Schering-Plough shareholders in respect of the proposed transaction.
Information regarding Schering-Plough’s directors and executive officers
is available in Schering-Plough’s proxy statement for its 2008 annual
meeting of shareholders, filed with the SEC on April 23, 2008, and
information regarding Merck’s directors and executive officers is
available in Merck’s preliminary proxy statement for its 2009 annual
meeting of stockholders, filed with the SEC February 25, 2009.
Additional information regarding the interests of such potential
participants in the proposed transaction will be included in the
registration and joint proxy statement filed with the SEC in connection
with the proposed transaction.