Merck Venture to Buy Part of British Drug Company

NEW YORK â€”  A joint venture of Merck & Co. and health-care products giant Johnson & Johnson said they agreed Monday to buy the U.S. non-prescription business of Imperial Chemical Industries PLC of Great Britain for more than $450 million.

The acquisition provides the first marketable products for the Johnson & Johnson-Merck Consumer Pharmaceuticals Co. joint venture, which was formed in March with the intent of establishing a major over-the-counter drug business.

The companies said in March that they would develop the business through acquisitions and the development of Merck’s prescription medicines, such as the ulcer drug Pepcid, for over-the-counter use.

“This automatically makes the joint venture a legitimate business because now they have products to sell,� said independent pharmaceutical analyst Hemant Shah of Warren, N.J.

Over-the-counter medicines are an increasingly profitable business for pharmaceutical companies because they provide a rich stable cash flow and recognizable brand-name products that are not jeopardized by generic “no-name� products.

In contrast, brand-name pharmaceuticals lose considerable market share to low-cost generic competitors.

Pharmaceutical giant Merck and Johnson & Johnson said they agreed in principle to acquire ICI’s U.S. over-the-counter drug business, which consists mainly of the Mylanta line of antacid products and the Mylicon line of anti-flatulence products.

Sales of these products in the United States were about $125 million last year, ICI said.

In return, ICI would acquire the U.S. rights to Elavil, which Merck introduced in 1961 as a prescription medicine for depression. Last year, Elavil’s sales were about $25 million, said John Doorley, a Merck spokesman.

Base for Growth

The value of the deal is in excess of $450 million, including a substantial cash payment to ICI, and is subject to the signing of definitive agreements and other considerations, the companies said.

“The Mylanta and Mylicon lines will give the joint venture a good start and a solid base for future growth,� said Edward Chase, Johnson & Johnson’s general manager for the venture.

ICI said in a statement that the agreement follows its decision to pursue continued growth in the United States by concentrating on successful prescription medicines. It said its over-the-counter business did not fit its business strategy.

ICI had worldwide pharmaceutical sales of $2.1 billion and pretax profits of $550 million last year. Pharmaceutical sales in the United States last year were about $800 million.