Merck and Schering Get Half a Divorce

Merck (NYSE: MRK) and Schering-Plough (NYSE: SGP) are ending their joint venture.

No, not the blockbuster partnership that covers their cholesterol-lowering drugs Vytorin and Zetia. That one's still intact -- although given the problems they've had, you could understand why one side might want a divorce in that case.

The joint venture that's getting the axe is a separate eight-year-old respiratory partnership that the companies formed to make a combination product of Schering's Claritin and Merck's Singulair. It seemed like a good move -- perhaps more so for Schering, since Singulair had $4.3 billion in sales last year -- but the FDA balked at the idea in April.

No one's said anything -- either back in April or now -- about what problem the agency had with the combo product, but it must have been pretty severe; the companies have simply abandoned the idea of getting the combo drug approved. With nothing else to work on, they ended their partnership, which triggered a $105 million payment from Merck to Schering.

The biggest beneficiaries of the breakup are probably Sanofi-Aventis (NYSE: SNY) and Johnson & Johnson (NYSE: JNJ), which sell competing allergy drugs Allegra and Zyrtec. If Merck and Schering had been able to convince doctors and patients that their combination product was the best -- and let's face it, we know they've got a good marketing department based on the success of Vytorin and Zetia -- the combo product could have done some serious damage to the sales of those products.

Instead, the breakup is just another black mark on the drugmakers' not-so-stellar 2008. The only good news is that the companies still have half a year to turn things around.

Copyright © 2008 Universal Press Syndicate.