Schering-Plough and Bayer Ink Deal

Schering-Plough(SGP Quote) Monday announced a broad marketing agreement with Germany's Bayer(BAY Quote) that both companies said will lead to a more efficient use of their marketing and sales strengths.

In a transaction expected to close Oct. 1, Schering-Plough will get exclusive rights to sell in the U.S. an assortment of Bayer primary care products, such as the antibiotics Avelox and Cipro. It also will take over for Bayer the U.S. marketing of the erectile dysfunction drug Levitra, which is co-promoted with GlaxoSmithKline(GSK Quote). Schering-Plough will pay royalties based on sales.

Schering-Plough said the transaction would be "mildly dilutive" on earnings per share this year and then mildly accretive. The company didn't provide specific estimates or provide details on the royalty arrangements.

"The strategic agreement represents a further step ... to build the new Schering-Plough," said Fred Hassan, chairman and chief executive of the Kenilworth, N.J.-based drugmaker. "The collaboration will enhance our primary care product line and complement our respiratory franchise."

The deal calls for Bayer to co-market in Japan Schering-Plough's cholesterol drug Zetia, now under review by Japanese regulators. In addition, Bayer will support the marketing of certain Schering-Plough cancer drugs in the U.S. and in Europe.

The agreement with Schering-Plough "will take advantage of the regional strengths of both companies," said Werner Wenning, chairman of Bayer. "It will help us adapt cost structures and resources in the United States to meet our strategic financial objectives." His company estimated that approximately 1,800 U.S.-based Bayer sales representatives will be transferred to Schering-Plough or lose their jobs.

Bayer also announced it was creating an oncology products business unit in West Haven, Conn., in anticipation of approval by the Food and Drug Administration of an experimental drug to treat advanced kidney cancer. The drug, now in late-stage clinical testing, is being developed with Onyx Pharmaceuticals(ONXX Quote).

Schering-Plough's stock was up 12 cents, or 0.6%, Monday at $19.33. Bayer's stock was up 62 cents, or 2.4%, to $26.54.