AstraZeneca may pay Merck & Co $3.3B

Anglo-Swedish drug major AstraZeneca has revealed details of a potential payment of up to $3.3 billion due to USA-based Merck & Co, if the latter decides to exercise its option to sell back rights to certain drugs that it markets in the USA. The payment, which had been anticipated, would result from the partial unwinding of a long-standing royalty deal between the two firms, which they entered into back in 1998 and is due to expire.

At present, Merck receives royalties on AstraZeneca's drugs, which include the antihypertensive Toprol XL (metoprolol succinate) and the gastrointestinal agent Nexium (esomeprazole), which generated revenues of $4.6 billion last year. The get-out option also includes the calcium channel blocker Plendil (felodipine) and the now withdrawn anticoagulant Exanta (ximelagatran; Marketletter February 20).

Speaking at a special "educational seminar," AstraZeneca's chief financial officer, Jon Symonds, said: "while the subject matter can appear complex, the conclusions are relatively straightforward. Based on our current estimates, if Merck exercises the first option in 2008, the net payment to Merck is unlikely to exceed the minimum value of $3.3 billion." The gross amount due to Merck is $4.7 billion, but this will be offset by the repayment of a $1.4 billion loan note.