Zeneca, Astra announce plans to merge

Just weeks before 1998 ended, London-based Zeneca Group and Astra AB, Sweden, announced that they plan to merge.

The companies released a formal, brief statement that said the pharmaceutical powerhouses are "engaged in advanced discussions regarding a possible combination of the two companies in a merger of equals transaction."

With Astra's market value at approximately $30 billion and Zeneca's market value closer to $38 billion, however, it's likely that Zeneca will acquire Astra in a stock swap. Together, the companies could rake in annual revenue of $14 billion.

In terms of size, AstraZeneca would rank as the world's seventh largest pharmaceutical company. Merck, Novartis and Glaxo Wellcome, among others, would remain ahead of it.

The merger announcement followed closely on the heels of a similar announcement made by European counterparts Hoechst, Germany, and Rhône-Poulenc, France. The driving factor behind that merger stirred speculation that could apply equally as well to the Astra-Zeneca duo: European drug firms are scrambling to improve research capabilities, financial portfolios and sales force muscle for better positioning in the growing North American health care marketplace. Teaming up today would give them stronger marketing clout in the United States and, possibly, prime them for marriages to North American-based drug firms in the future.

Portfolio-wise, Zeneca brings strong oncology medicines to the table, as well as anesthetics and treatments for cardiovascular and respiratory ailments. More than 30% of its total sales comes from its oncology products; 44% comes from cardiovascular sales, 16% comes from sales of central nervous system products and 7% of sales is derived from anti-infectives.

Its leading products include the antipsychotic Seroquel, cancer drugs Nolvadex and Zoladex, the ACE-inhibitor Zestril and the antiasthma medication Accolate.

Astra, meanwhile, only recently consolidated its portfolio by bringing AstraMerck and Astra USA under one umbrella. Previously, Astra had shared ownership of AstraMerck with Merck & Co. (See sidebar.) Astra also brings a profitable cardiovascular portfolio to the deal, as well as antiasthma, antiulcer and anesthetic products. Its antiulcer medicine, Prilosec, was the world's best-selling prescription drug in 1998, according to reports in the Wall Street Journal.

Both Prilosec and Zestril will lose patent protection within three years, however, leaving the merging companies with the shared dilemma of replacing significant revenue.

In terms of sales force sizes, Astra weighs in with approximately 2,200 sales reps after consolidating Astra USA and AstraMerck personnel, according to IMS Health. Zeneca employs roughly 2,000 sales reps. Combined, AstraZeneca will fall somewhere behind Merck, Bristol-Myers Squibb and Pfizer in terms of total number of sales reps. PR