Merck to Buy ScheringPlough for Billion NYTimes.com

A drug deal that is mainly about the drugs.

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Richard Clark, left, chief executive of Merck, and Fred Hassan, chief of Schering-Plough.

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That was many analysts’ assessment Monday of Merck’s agreement to pay .1 billion in cash and stock for Schering-Plough. The merger would join pharmaceutical companies that had combined sales of .9 billion last year.

Mega-mergers of this sort have been widely expected ever since Pfizer began the consolidation race in January by agreeing to pay billion for Wyeth. And others are likely to follow, as many of the same factors — like expiring patents and soaring development costs — propel drug makers into one another’s arms.

But if Pfizer-Wyeth was driven in part by desperation, analysts said, for Merck the Schering deal may actually be a good opportunity to restock its medicine chest. Merck’s former blockbuster bone drug Fosamax has gone generic, and in a few years the same thing will happen to its best-selling allergy and asthma drug Singulair. The merger gives it access to successful brand-name Schering products with much longer patents, like the prescription allergy spray Nasonex. And Merck could capitalize on Schering’s investments in promising biotechnology drugs.

“It’s better than the other deal,” Robert Hazlett, an analyst with BMO Capital Markets, said of the Merck-Schering merger. “I’m not enamored of Pfizer-Wyeth.”

Among other measures, he said that Pfizer had said it would slash its second-quarter dividend in half — to 16 cents — when it agreed to buy Wyeth, while on Monday Merck told shareholders it would not change its 38-cent quarterly dividend.

Still, like any marriage of convenience, this one has potential dissenters who are unlikely to forever hold their peace.

One likely controversy involves the cholesterol drugs Zetia and Vytorin, which the companies already jointly market and which last year had combined sales of .6 billion. But sales have been plummeting in the wake of studies that raised questions about Vytorin’s effectiveness and safety.

On Monday, Senator Charles E. Schumer, Democrat of New York, criticized the companies over Vytorin and raised concerns about their planned merger.

“The last time these two companies teamed up, it was to aggressively market a brand-name drug that may not have provided any additional benefits over existing generics,” he said in an e-mail statement. “That incident left a sour taste in the mouths of a lot of people, and may have cost the government a lot of money.”

The House Committee on Energy and Commerce has also been investigating the safety and efficacy of Vytorin.

Merck executives said Monday they were confident that a broader, longer-term Vytorin study, set to conclude in 2012, would prove the drug to be safe and effective for lowering bad cholesterol.

Schering would also provide Merck with popular consumer brands like Coppertone and Dr. Scholl’s, as well as a strong international presence — 70 percent of Schering revenue comes from outside the United States — that would extend Merck’s global reach.

And much more than Merck, Schering has been investing in developing biologics — biotechnology drugs derived from living cells, which are much harder for potential generic makers to copy than the small-molecule chemical compounds on which the big pharmaceutical companies have traditionally based their businesses.

In 2007, Schering paid .4 billion for Organon, a biotechnology company that has several novel drugs, including a fertility treatment, under late development.

Fred Hassan, the chief executive of Schering-Plough, described the new company as a juggernaut of drug innovation and development that would have 18 drugs in phase 3 clinical trials — the late-stage human studies that are required before new drugs can gain approval from the Food and Drug Administration.

“Eighteen phase 3 projects will make this the most effective and strongest R.& D. machine in the industry,” Mr. Hassan said.

By 2011, the merger should generate .5 billion in annual cost savings by consolidating research, manufacturing, administration and marketing, Merck’s chief executive, Richard T. Clark, said in a conference call with analysts. The new company could reduce the current work force of more than 100,000 by up to 15 percent with the cuts coming mainly from staffing outside of the United States, Mr. Clark said.

Further details of the merger are to be made public later in the week, he said.

There is at least one big question that hangs over the proposed merger: What happens with Remicade, a rheumatoid arthritis drug that represented .1 billion in sales for Schering last year.

Schering markets Remicade outside the United States in an agreement with Johnson & Johnson, which sells the drug in this country. Under a termination clause in that agreement, the rights to Remicade and another drug under development could revert to Johnson & Johnson if control or ownership of Schering changes.

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