Monday, March 09, 2009

Schering Plough & Merck Madness

Schering Plough (SGP) and Merck (MRK) to merge. The deal seems complicated by a co-marketing deal with Johnson & Johnson (JNJ) and Schering for an anti-inflamatory drug Remicade. There is a change in control provision and JNJ may end up controlling the entire drug but at what cost? The merger is supposed to create a $3.5 billion dollar cost savings. Easier said than done.

The merger does not address the issue of meagre product pipelines and many big drugs about to go off-patent. This just shuffles the deck and gives the impression of motion. Investors should be disappointed in the boards of directors. These companies remind me of the auto business. Big, dominant, arrogant with an occasionally popular product.

Watch for the laid off staff, 15%, who will walk out with the good idea’s.