Merck could upset AstraZeneca deal

ASTRAZENECA, the pounds 48bn drug giant to be formed from the merger of Zeneca and the Swedish group Astra, could be forced to give up a large chunk of its profits to its US rival Merck, it emerged yesterday.

Under a distribution deal between Astra and Merck, the Anglo-Swedish group could lose a sizeable portion of its earnings in the US, the world's largest and fastest-growing pharmaceutical market, for the next 12 years.

News of the payment is a blow for Astra and Zeneca and comes less than a week after they announced plans to merge to form the world's third largest drug company.

The Astra-Merck deal dates back to 1982, when the two companies formed a joint venture to market the Swedish company's drugs in the US.

The deal was renegotiated in July this year, when Astra won the right to buy out Merck's share of the joint venture in 2008.

The new deal stated that if Astra was to merge with a rival, it would have to pay Merck compensation of around $5bn over the next 10 years.

However, according to the small print of the contract, Merck can refuse to be bought out and can continue to receive the stream of royalties from the sale of Astra's drugs in the US.

At present, Merck receives around 30 per cent of the joint venture's sales, estimated at around $1.5bn.

If the American group decides to retain the joint venture, AstraZeneca would be forced to pay the royalties on all US sales of Astra drugs until 2010, the first date in which the joint venture can be terminated by the Swedes.

A Merck spokeswoman said that the company had not decided on whether to accept compensation or to carry on with the joint venture.

A spokeswoman for Zeneca said: "We have no cause of concern over this agreement."