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Friday, June 19, 1998 Published at 15:42 GMT 16:42 UK

Business: The Company File

Astra buys out Merck in $10bn deal

There's money in pills

The Swedish pharmaceutical powerhouse Astra has agreed a deal to free itself from a marketing partnership with Merck, the world's biggest drug company.

The deal clears the way for Astra to merge with another pharmaceutical company, continuing the trend towards consolidation that has swept through the industry.

Under the terms of the deal, Astra will pay Merck $4.4bn over the next 10 years and a share of the revenues that would have been generated by the joint venture. Analysts estimate the total payout will reach $10bn (£6bn).

Up until now, Merck has sold most of Astra's drugs in the US - most notably Losec, its best-selling anti-ulcer drug. The drug has had worldwide sales of $4bn, with $2.2bn in North America.

Losec's patent expires in 2001, and Astra has said it is looking for a new strategic partner to develop and market new products. The UK's Zeneca, Germany's Bayer, and the US company Schering-Plough have been mentioned as potential partners.

"We now have the strategic freedom to best serve the interests of our shareholders by charting our own course in the global pharmaceutical market," said Hakan Mogren, Astra President and CEO.

A new subsidiary, Astra Pharmaceuticals, will be formed to consolidate Astra's interests in the USA, with 3,800 employees.

Astra says its expects cost savings of around $100m by 2000 from the plan.

Astra is one of the world's fastest growing pharmaceutical companies, with profits of $1.8bn last year, up 8% on 15% sales growth. It is the second largest Scandanavian company in terms of market capitalisation.

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