• Total price of the sale will be $41.1 billion or $23.6 per Schering share.

• This deal is structured as a reverse merger with Schering being renamed Merck. This is being done to avoid triggering a loss of rights, according to Merck.

• To pay for the merger, Merck is taking out a $3 billion 364-day bridge loan  and adding $5.5 billion in revolving credit. The company will be fronting $9.8 billion in cash, and another $22.8 billion will stem from merck stock.

• Schering share holders will own 32 percent of the new combined company, while Merck shareholders will  own 68 percent of the company.

• Joint company expects to save approximately $3.5 billion by 2011.

• There will be a job freeze for both companies beginning this morning.

• Complete transaction by Q4 2009.

• Remicade distribution rights between Schering and Johnson & Johnson are not expected to be in question, but Merck is prepared in case of legal problems. Question as to whether there will be a change of control.

• Synergies have not been defined beyond potential savings.

• Very little overlap in compounds with the exception of two late-stage programs in Hepatitis C and one other.

• Merck will gain access to Schering’s massive animal health product portfolio.

• Joint company will reside at Merck’s Whitehouse Station, New Jersey location.

Merck announced, a little over an hour ago, that it had signed an agreement with Schering-Plough’s board of directors to merge the two companies under the Merck name.

The stock and cash transaction is worth over $41 billion with Schering shareholders receiving $10.50 per share in cash and 0.5767 of a share of the combined company—a 34 percent premium over Friday’s closing price. Merck Chairman Richard T. Clark will assume control of the joint company. Schering CEO Fred Hassan will continue to manage the company until the end of the merger period. He had this to say in a release this morning.

“We are joining forces with Merck, our long-term partner in our cholesterol joint venture, to create a dynamic new leader in the pharmaceutical industry,” Hassan stated.

No word yet on what this means for the future of the employees, but as with the Pfizer/Wyeth mergers, cuts of redundant positions are expected.

“A key priority is keeping the best talent from both companies,” Merck stated in a release. “Recognizing that the combination will result in a much larger organization, Merck expects that the substantial majority of Schering-Plough employees will remain with the combined company.  In addition, both Merck and Schering-Plough will institute hiring freezes immediately.”

Schering and Merck have been strategic partners for years, with a collaberation on the blockbuster cholesterol drug Vytorin. The two companies came under fire last year after a study revealed that the drug was no better than its generic equivalent at lowering arterial plaque—a treatment that it was never approved for. The drug has been a billion dollar seller and has proven to lower total cholesterol levels while raising good cholesterol.

The two companies, also, failed to get an approvable letter, last year, for a combination drug of Claritin and Singulair to treat seasonal allergic rhinitis.

We’ll have more on this story throughout the day.

FDA, yesterday, released its assessment of the now-notorious ENHANCE trial—which tested whether Vytorin was better than simvastatin alone in reducing arterial plaque in a group of patients with severe genetic high cholesterol. It wasn’t, and publication of the study set off a firestorm of criticism of the drug and its promotional campaign.

According to FDA, the two-year study showed Vytorin had only a tiny difference in the in the growth of plaque compared with a simvastatin. Neither arm of the study showed much change at all—perhaps not a surprise in patients who suffered from unusually high levels of LDL cholesterol and had been treated previously. However, FDA was quick to point out that the level of LDL cholesterol dropped 56 percent in patients taking Vytorin, while the simvastatin group only showed a drop of 39 percent.

“The results from ENHANCE do not change FDA’s position that an elevated LDL cholesterol is a risk factor for cardiovascular disease and that lowering LDL cholesterol reduces the risk for cardiovascular disease,” a release from FDA stated. “Based on current available data, patients should not stop taking Vytorin or other cholesterol lowering medications.”

The damage, however, might already be done. Sales of the Merck/Schering Plough drug plummeted through 2008, costing both companies billions in sales. The drug was also named as one of the reasons why Merck was forced to cut its workforce by up to 12 percent.

Vytorin is now being studied in the IMPROVE-IT trial, designed to determine whether the drug is any better than simvastatin alone in lowering the chance of major cardiovascular events. Results will be released after the trial ends in 2012.

The layoffs will be staggered throughout different parts of the company, with 40 percent of the reductions being US employees. About 25 percent of the cuts will be senior and middle management

Merck President and CEO Richard T. Clark (pictured above in happier times) cited manufacturing challenges of some vaccines as a key problem area, along with a 15 percent drop in sales of the cholesterol drugs Zetia and Vytorin, which have been plagued with troubles in the past year. The loss of patent exclusivity of Fosamax also set the company back more than $127 million over last year. Even Merck’s HPV blockbuster Gardasil saw a decrease in sales of 4 percent, with earnings of $401 million in Q3 2008.

Finally, Clark announced that Tredaptive will be delayed because of manufacturing issues that the company is currently working through.

“Streamlining Merck to meet the demands of the ever-changing business environment includes the ever-painful reality of losing employees whose contributions have helped the company accomplish so much throughout the years,” Clark said to investors this morning. “But no matter how difficult the decisions are today, we know our long-term strategy is right.”

Merck is investing $1 billion for new plants in North Carolina and Ireland, and is instituting a customer-centric selling model. Research labs are also deploying new operating strategies.

Photo from wikipedia.org.