Merck & Co will keep booking sales and profits for two more years tied to AstraZeneca Plc's widely used acid reflux medicines Nexium and Prilosec under an amended agreement between the two large drugmakers.
Merck previously assumed it would record contributions from the longstanding partnership only through September this year. Now the alliance will last until 2014, when AstraZeneca will have the option of buying Merck's interest in the partnership.
The continuation of the partnership is expected to add about $200 million to Merck's revenue and 3 cents to 5 cents in earnings per share in 2012, but does not change the U.S. firm's full-year profit guidance, Merck said on Wednesday.
The revised deal will help shore up Merck's financial performance through the U.S. patent expiration later this year of its big-selling Singulair allergy and asthma drug, although the benefits will dwindle as sales of Nexium decline.
The partnership agreement dates back to a selling and distribution joint venture originally set up between Merck and Sweden's Astra in 1982. Astra later merged with Britain's Zeneca to form AstraZeneca.
Under the amended deal, the two partners have agreed an option price of $327 million payable to Merck in 2014, plus an amount equal to 10 times Merck's average 1 percent annual profit allocation in the partnership, expected to be some $80 million.
The price paid by AstraZeneca could also include the net present value of up to 5 percent of future U.S. sales of painkiller Vimovo.
ISI Group analyst Mark Schoenebaum said buying out Merck this year would probably have cost AstraZeneca around $800 million and delaying until 2014 would likely reduce the amount to about $450 million.
(Reporting by Lewis Krauskopf and Ben Hirschler; Editing by Maureen Bavdek and Hans-Juergen Peters)