Thursday, 5 November 2009

Merck merge with Schering Plough for $41 billion

Merck (manufacturer of the antifungal drug Caspofungin) and Schering-Plough (manufacturer of the antifungal drug Posaconazole) have merged their companies to form a single company that will operate under the name Merck. The merger has cost Merck over $41 billion.
The merger was initially announced in March 2009 and has taken 8 months to complete.

The new company will have a combined revenue of $40 billion with savings of $3.5billion a year due after duplicated jobs are removed. It will have 15 candidate drugs being developed for market in the near future and will be employing people in 140 countries. Over half of its revenues will be earned outside the US.

How will this help the consumer?
Drug development is a hugely expensive business with billions of dollars at stake in every drug in late stage development. Billions of dollars have to be invested in the development of every drug and every drug can still fail vital tests after years of expensive development, losing vast amounts of money.
Some drugs are more likely to fail than others so smaller companies are more likely to concentrate on the 'sure thing' in order to avoid catastrophic finacial losses.

As a larger company the new Merck will now be able to do more 'risky' drug development as it will be able to absorb more financial risk. It will be able to investigate treatments for markets in which there are less well defined targets in the hope of the higher financial returns that they could bring.

Some illnesses effect smaller numbers of people but still require huge investment with which to develop new drugs to treat those illnesses. The consequent return is smaller as it can only be sold to fewer people. These drugs are less likely to be made by smaller companies as the potential return is lower. People needing treatment for rarer illnesses such as aspergillosis should be encouraged that they are more likely to be given new treatments in the future as a result of this merger.

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