European Drug Firms Complete Merger Astra And Zeneca Have 4,000 Employees In The Region. U.s. Headquarters Will Probably Be Here.

Posted: April 07, 1999

European drugmakers Zeneca Group Plc and Astra AB, with 4,000 employees combined in the Philadelphia and Wilmington areas, yesterday completed their $37 billion merger to become the world's third-largest drug firm.

The new company is called AstraZeneca; its two components had combined sales of $17.2 billion last year.

AstraZeneca's headquarters will be in London, where Zeneca was based, and its research headquarters will remain in Sweden, Astra's home country.

"Thousands and thousands of people around the world are very excited about this opportunity," said C.G. Johansson, chief executive of AstraZeneca's U.S. operations.

"We will now have the global power and global reach that can match anyone else in the world," he said.

Shares of the new company, in the form of American Depositary Receipts, fell $1.81 to $46.69 yesterday in the first day of trading on the New York Stock Exchange.

Johansson said it would be a month before AstraZeneca's new management decides where it will put its U.S. headquarters. Astra has 1,600 employees in Philadelphia's western suburbs and Zeneca has 2,400 in the Wilmington area.

Johansson, who headed Astra's U.S. operations before the merger, said the new site will be in either Delaware or Philadelphia's suburbs.

The company has said it would eliminate 6,000 jobs and cut overall costs by 11 percent, or $1.1 billion, in the next three years.

Johansson said managers have not decided where the cuts will come.

"But in the long run," he said, "the company will increase the number of jobs compared to what it would have been if the two companies remained independent."

Johansson acknowledged analysts' concerns that patents on two of the combined company's major drugs are set to expire, but he said the company has strong new products in the pipeline.

Zeneca specializes in cancer drugs and makes Zestril, a leading hypertension drug. Astra has concentrated on asthma, hypertension and gastrointestinal drugs such as Losec, an antiulcer medication that is the world's top-selling drug. Astra also makes Prilosec, another well-known gastrointestinal drug.

The patents on Losec and Zestril, which made up 32 percent of the combined company's sales last year, are set to expire in the next few years.

Johansson said the company would develop a strategy for the drugs after they lose their valuable patents. He also said the company is developing cardiovascular drugs and is close to launching new drugs for depression and schizophrenia.

Johansson said AstraZeneca would have 4,000 sales people in the United States, second to Pfizer Inc. But he also said the company would continue to develop direct marketing to patients and is working on patient-education programs on breast cancer prevention.

"The U.S. is the most important pharmaceutical market in the world and both Zeneca and Astra have relatively smaller market shares here," Johansson said. "We have an enormous opportunity."

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