The alliance, which will see S-P take over responsibility for marketing Bayer's primary care products in the US, will allow the German company to make swingeing cuts in its own US sales and marketing forces. 1,800 jobs look set to be cut, although Bayer said that most will be transferred to S-P.
Bayer's pharmaceuticals business has had difficulty recovering from the withdrawal from the market of its lipid-lowering drug cerivastatin on safety grounds a few years back, leaving a hole in the product portfolio that has not been filled from its product pipeline.
This pressure, coupled with patent expiries on major product lines, has weaned pharma as the backbone of the business and left the group more vulnerable to the pressures affecting its chemicals activities, largely now spun out into a new entity called Lanxess.
This has left Bayer as a mid-range pharmaceutical company, and increased speculation that it may seek a merger to regain its once-lofty position in the sector. And the broad-ranging agreement with Schering-Plough will do little to dispel this speculation.
Under the terms of the agreement, Bayer's primary care products Avelox (moxifloxacin), Cipro (ciprofloxacin) and Adalat (nifedipine), as well as other smaller established primary care products will be marketed and distributed by Schering-Plough in the US.
Schering-Plough will also take over from Bayer the US commercialisation activities for Levitra (vardenafil), a drug for erectile dysfunction that is marketed under a co-promotion agreement between Bayer HealthCare and GlaxoSmithKline.
This had been held up as the most important new drug in Bayer's pharmaceutical pipeline, but initial sales have not lived up to expectations.
Bayer said it expects to incur €50-70 million in costs mostly this year due to the job cuts and other one-off expenditures, but that the deal with Schering-Plough would have a positive impact on the company's profits in subsequent years.
Also both parties have agreed to set up regional marketing and distribution in the US and Japan, while Bayer will reposition its pharmaceuticals business in the US to create an oncology business unit that will also promote some of Schering-Plough's product lines.
Bayer and Schering-Plough have also committed to a co-marketing agreement for Japan for future promotion of Schering-Plough's lipid-lowering drug Zetia (ezetimibe), which is currently under regulatory review.
Schering-Plough said that one consequence of the agreement was that it may now have to out-license an antibiotic partnered with Japan's Toyama as this would compete with Bayer's quinolone antibiotics.