By Lisa Seachrist
WASHINGTON — Astra AB and Merck & Co. agreed to restructure their 50-50 joint venture, Astra Merck Inc. in a deal that could deliver between $7 billion and $10 billion to Merck and grant Astra control over the development of the joint venture's pipeline.
Astra Merck's business will be combined with Sodertalje, Sweden-based Astra's wholly-owned Astra USA Inc. subsidiary to form a limited partnership, Astra Pharmaceuticals LP, which will be headquartered in Wayne, Pa., with production and development activities in Westborough, Mass.
Merck said the new arrangement will yield more revenue and income from the outset than the company would have realized under the previous agreement, which began in 1982 and granted Merck rights in the U.S. to Astra's pharmaceutical products in perpetuity.
Under terms of the joint venture changes, Astra will provide Merck with a $1.4 billion loan to facilitate the restructuring at closing, which is expected July 1, 1998. In addition, Astra will buy out Merck for a price as yet to be determined, but at least $4.4 billion, in 2008. However, the most lucrative part of the deal for Merck will be the ongoing revenue from Astra Merck products and certain Astra USA products for at least 10 years.
Astra will have the option to buy out Merck's interest in these products in 2008, 2012 or 2016, with the exception that Merck's interest in the gastrointestinal drugs Prilosec and perprazole extends through the year 2017. Prilosec is the best-selling prescription medication in the world.
Should Astra merge with another pharmaceutical company or be acquired by another company, Merck will receive revenue and income from compounds existing at the time of the merger or acquisition until the year 2008, with the exception of Prilosec and perprazole.
Carol Goodrich, a spokeswoman for Merck, said that the restructuring provides Merck with cash that will be used for general corporate purposes and frees Merck from any expenses related to Astra Merck.
Astra expects the restructuring to be dilutive to its earnings for the first two years, but after the year 2000, the company expects to see significant profits. The restructuring provides Astra with immediate management control and strategic freedom to pursue Astra Merck's pipeline, which has 22 drug candidates in Phase II or III clinical trials.
Carl-Gustaf Johansson will be president and CEO of Astra Pharmaceuticals LP.
Astra's stock (NYSE:AAB) closed Friday at $20.25, up $0.62. Merck's stock (NYSE: MRK) closed at $126.875 down $2. *