Merck and AstraZeneca Agree to Amend Partnership
WHITEHOUSE STATION, N.J., June 27, 2012 – Merck (NYSE: MRK), known as MSD outside the
United States and Canada, announced today that Merck and AstraZeneca have amended the
option agreement related to their partnership known as AstraZeneca LP (AZLP).
The updated agreement provides that AstraZeneca will not exercise its option to acquire Merck's
remaining interest in AZLP in 2012 and provides AstraZeneca a new option to acquire Merck's
partnership interest in June 2014. This amended agreement benefits both companies and
provides clarity around the valuation process at the conclusion of the partnership.
As a result of the amended agreement, Merck will continue to record supply sales and equity
income from the partnership for the remainder of 2012 and 2013. In 2014, AstraZeneca now will
have the option to purchase Merck's remaining interest in AZLP based in part on an agreed-upon
calculation of the value of Merck's interest in Prilosec and Nexium. AstraZeneca's option is
exercisable between March 1, 2014 and April 30, 2014. If AstraZeneca chooses to exercise this
option, the closing date is expected to be June 30, 2014.
Under the amended agreement, the agreed-upon valuation for Merck's interest in Nexium and
Prilosec for the 2014 exercise is a fixed sum of $327 million, subject to a true-up in 2018 based on
actual sales from closing in 2014 to June 2018. Also, the exercise price will include an additional
amount equal to a multiple of ten times Merck's average one percent annual profit allocation in the
partnership for the three-years prior to exercise. The exercise price calculation also could include
the net present value of up to five percent of future U.S. sales of Vimovo, subject to a sales
threshold that has not yet been achieved plus certain additional amounts.
Merck previously assumed it would record sales and earnings contributions from AZLP only
through Sept. 2012. The continuation of the partnership is expected to contribute approximately
$200 million to Merck's revenues and approximately $0.03-0.05 in earnings per share to Merck in
2012 and does not change Merck's prior full-year guidance for 2012.
As a result of declining sales of Nexium and supply of bulk Nexium by third-party suppliers, the
quarterly contribution to earnings in 2013 is expected to be lower than the fourth-quarter 2012
contribution. Merck expects to provide full-year 2013 guidance during its fourth-quarter 2012
"This amendment provides clarity about the valuation of this long and successful partnership and
enhances our ability to drive Merck's performance through the impact of U.S. SINGULAIR patent
expiration later this year," said Peter N. Kellogg, executive vice president and chief financial officer
of Merck. "We are confident that we can achieve our 2012 targets, and this agreement will help
partially offset the macroeconomic and market austerity pressures anticipated in 2013."
Today's Merck is a global healthcare leader working to help the world be well. Merck is known as
MSD outside the United States and Canada. Through our prescription medicines, vaccines,
biologic therapies, and consumer care and animal health products, we work with customers and
operate in more than 140 countries to deliver innovative health solutions. We also demonstrate
our commitment to increasing access to healthcare through far-reaching policies, programs and
partnerships. For more information, visit www.merck.com and connect with us on Twitter,
This news release includes “forward-looking statements” within the meaning of the safe harbor
provisions of the United States Private Securities Litigation Reform Act of 1995. Such statements
may include, but are not limited to, statements about the benefits of the merger between Merck
and Schering-Plough, including future financial and operating results, the combined company’s
plans, objectives, expectations and intentions and other statements that are not historical facts.
Such statements are based upon the current beliefs and expectations of Merck’s management
and are subject to significant risks and uncertainties. Actual results may differ from those set forth
The following factors, among others, could cause actual results to differ from those set forth in the
forward-looking statements: the possibility that the expected synergies from the merger of Merck
and Schering-Plough will not be realized, or will not be realized within the expected time period;
the impact of pharmaceutical industry regulation and health care legislation; the risk that the
businesses will not be integrated successfully; disruption from the merger making it more difficult
to maintain business and operational relationships; Merck’s ability to accurately predict future
market conditions; dependence on the effectiveness of Merck’s patents and other protections for
innovative products; the risk of new and changing regulation and health policies in the U.S. and
internationally and the exposure to litigation and/or regulatory actions.
Merck undertakes no obligation to publicly update any forward-looking statement, whether as a
result of new information, future events or otherwise. Additional factors that could cause results to
differ materially from those described in the forward-looking statements can be found in Merck’s
2011 Annual Report on Form 10-K and the company’s other filings with the Securities and
Exchange Commission (SEC) available at the SEC’s Internet site (www.sec.gov).
Copyright 2009 Merck Sharp & Dohme Corp., a subsidiary of Merck & Co., Inc., Whitehouse Station, N.J., U.S.A.
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