Astra Merck and Astra USA combine resources

Astra Merck Inc., Wayne, PA, and Astra USA, Westborough, MA, will combine to create a new entity called Astra Pharmaceuticals LP, their parent companies announced at press time.

Sweden-based Astra AB and Madison, NJ-based Merck & Co. Inc., who co-own Astra Merck, signed an agreement to formally restructure their joint venture. In that agreement, they decided that Astra Merck would combine with Astra's wholly owned subsidiary, Astra USA, to form a limited partnership.

According to the new agreement, Astra will assume full management control of Astra Pharmaceuticals as the general partner, with Astra's Carl-Gustaf Johannson stepping into the role as president and CEO of the new company. Merck, in the meantime, will maintain its interest in and receive revenue from several of Astra Pharmaceuticals's best products. In the past, the two companies shared both management and financial risks and rewards for Astra Merck.

Both companies anticipate that profitability will prove generous as a result of the restructuring.

Astra stated that it expects the new corporation to save as much as $100 million by the year 2000. It also expects to see gains after an initial dip in revenue by the year 2000.

Furthermore, by shaking itself free of Merck's tight embrace, Astra positions itself more strategically for a potential merger with another major pharmaceutical company.

"Astra today embarks on the next stage in our growth and development," said Hakan Mogren, Astra's president and CEO. "We now have the strategic freedom to best serve the interests of our shareholders by charting our own course in the global pharmaceutical market."

In addition to receiving a $1.4 billion cash loan from Astra at closing, Merck will receive ongoing revenue and income for at least 10 years based on sales of current and pipeline Astra Merck products and certain Astra USA products. Astra will also have the right to buy out Merck's interest in most products - aside from top-selling Prilosec and perprazole - in 2008, 2012 or 2016 if their combined sales stay above a specified level.

Finally, Merck and Astra agreed that Merck's right to receive revenue and income will terminate for the price of anywhere from $675 million to $1.5 billion if Astra chooses to merge with another company.

"All in all, this is a very advantageous agreement for Merck," said Raymond Gilmartin, Merck's chairman and CEO.

Sales force stability

Astra has no plans to reduce either Astra Merck's or Astra USA's sales forces as a result of the restructuring, the company stated.

Currently, Astra Merck employs a 1,500-person field sales force, and Astra USA maintains a sales force of approximately 700. The new company will be headquartered in Wayne, PA, and have production and development facilities in Westborough, MA.

In addition to Prilosec, an antiulcerant that generated $2.2 billion in net sales at year end in 1997, Astra Merck markets two high blood pressure medicines - Plendil and Lexxel - and a medicine for cardiac arrhythmia called Tonocard.

Astra USA is a leading marketer of hospital products in the United States. It promotes Xylocaine, a local anesthetic; Toprol-XL, a beta-blocker; and Pulmicort Turbuhaler, an anti-asthma agent.

The agreement finalizing the restructuring closed July 2. PR