Astra & Merck Sign Restructuring Deal

21 June 1998

Astra and Merck & Co have finally announced details of the restructuringof Astra Merck, their 50:50 joint venture in the USA. Contrary to speculation within the industry, a divorce is not imminent (Marketletter June 15) as the JV's business will be combined with Astra USA in a new partnership to be named Astra Pharmaceuticals LP. Rather than any major split, Astra says it will have management control of the new company "as the general partner."

The Swedish group says that the new entity is likely to benefit from cost savings of approximately $100 million annually by 2000, though it does not anticipate any reduction in its sales force in the USA.

Merck claims that it has signed a win-win deal, and expects the new arrangement to yield more revenue and income than it would receive under the existing agreement. Under the terms of the deal, Merck will receive revenues for at least 10 years on sales of both current and pipeline Astra Merck products, as well as certain products from Astra USA. Astra now has the right to buy out Merck's interest in these products in 2008, 2012 or 2016, although critically the US firm retains rights to earnings from Prilosec (omeprazole) and potential sales of its follow-up compound perprazole until 2017, if combined sales stay above a specified, though undisclosed level.

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