Drug Makers Astra and Zeneca Confirm $37-Billion Merger Deal

Astra and Zeneca Group, two mid-sized European drug makers, confirmed Wednesday that they will merge in a $37-billion deal that would create one of the world’s biggest drug manufacturers.

Sweden’s Astra is best known for Prilosec, an ulcer and heartburn medication that is the world’s top-selling prescription drug. Britain’s Zeneca is the second-biggest maker of cancer drugs, behind New York-based Bristol-Myers Squibb.

The companies expect annual cost savings of $1.1 billion, but they expect to incur about $1.2 billion in restructuring costs in creating the new company, to be called AstraZeneca. About 6,000 jobs, or 11% of their global work forces, would probably be cut in the next three years.

Behind the industry’s current merger wave is the need to increase research spending to compete with giants such as Pfizer, Glaxo Wellcome and Merck and the desire to pool resources to boost marketing.

“If we are going to be competitive among world pharmaceutical companies, we need this merger,” said Hakan Mogren, chief executive of Astra, who would be deputy chairman of the new company.

Prilosec is scheduled to lose its patent protection in 2001. That will open the door for generic firms to make a less expensive copy and slow Astra’s sales growth. The company is also the maker of lidocaine, a leading local anesthetic.

Besides its cancer drugs, Zeneca has a large agrichemical business and owns Salick Health Care, a U.S. operator of cancer treatment and dialysis centers.