Merck keeps rights to certain AstraZeneca drugs

Thu 28 Feb, 2008 13:09

LONDON (Reuters) - AstraZeneca (AZN.L) said on Thursday that Merck had decided not to exercise an option which would have relinquished its rights to a number of AstraZeneca drugs in return for a one-off payment.

AstraZeneca said other aspects of a complex arrangement between the two drugmakers, which entitles Merck to a royalty on U.S. sales of many AstraZeneca medicines, would proceed as previously envisaged, and would lead to a net cash outflow to Merck of $2.63 billion (1.32 billion pounds) during the first quarter of 2008.

Anglo-Swedish group AstraZeneca said Merck had decided not to relinquish its rights over the medicines Atacand, Lexxel, Plendil and Entocort.

As a result, AstraZeneca will continue to make payments related to these products to the U.S. group until at least 2010, at which time AstraZeneca has the option to take back the medicines for about $650 million.

AstraZeneca had said previously that if Merck exercised the option, it expected to have to make a payment of about $3.3 billion in early 2008.

AstraZeneca said it made payments in respect of the products covered by the option of $69 million to Merck in 2007.

The complex agreement with Merck dates back to a selling and distribution joint venture originally set up with Sweden's Astra, prior to its merger with Britain's Zeneca, which was restructured in 1998.

At 12:50 p.m., AstraZeneca shares were down 1.2 percent at 1,957 pence, valuing the firm at about 29 billion pounds.

(Reporting by Mark Potter, Editing by Mike Elliott/Rory Channing;