Exhibit 10.1
Contact:
Kenneth I. Sawyer
President
Pharmaceutical Resources, Inc.
(914) 573-0390
FOR IMMEDIATE RELEASE
PHARMACEUTICAL RESOURCES, INC.,
ANNOUNCES STRATEGIC ALLIANCE WITH
MERCK KGaA
Spring Valley, New York, March 26, 1998 -- Pharmaceutical Resources, Inc.
(NYSE/PSE:PRX) announced today that it has formed a strategic alliance with
Merck KGaA, Darmstadt, Germany, a German pharmaceutical, laboratory and chemical
company. Under the agreement, Merck KGaA, through its subsidiary Lipha Americas,
Inc. ("Lipha"), will pay Resources cash for 10,400,000 newly-issued shares as
well as give Resources the sole rights to market an important portfolio of
products for the U.S. through Merck's Canadian subsidiary, Genpharm, Inc.
("Genpharm"). The cash purchase price of $2 per share will provide Resources
$20.8 million for investment in its continuing business, and will give Merck
KGaA a 36% stake in Resources. The Company intends to use a significant portion
of the net proceeds of the stock sale to repay advances made to it under its
existing line of credit and the remainder will be used for working capital,
including business expansion.
In addition, Merck KGaA agreed to purchase 1,813,272 shares of the
Company's common stock from Clal Pharmaceutical Industries Ltd. ("Clal"), the
Company's largest stockholder, and Merck KGaA and the Company acquired rights to
purchase an additional 500,000 shares from Clal in three years. In connection
with the transactions, Merck KGaA and Genpharm also agreed to provide certain
consulting services to the Company in exchange for 5-year options to purchase an
aggregate of 1,171,040 additional shares of the Company's common stock at $2 per
share.
The sole rights to the portfolio of products are covered by a
distribution agreement with Genpharm, granting the Company exclusive U.S.
distribution rights for up to 40 generic pharmaceuticals currently being
developed, some of which have obtained U.S. FDA approval and others which have
been or will be submitted to the FDA for approval.
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Genpharm will pay all of the research and development costs associated with
the 40 products. In return, Resources will pay a certain percentage of gross
margin to Genpharm on the sales of the products. Additionally, Merck KGaA will
work with Resources on future opportunities with specific products to further
enhance its North American generic business.
Under the stock purchase agreement signed today, Lipha will have the right,
subject to the closing of the sale transaction, to designate a majority of the
Company's Board of Directors. The Company's current Board of Directors will
designate three persons to continue as Directors of the Company, one of whom
will be Kenneth I. Sawyer (the current Chairman, President and Chief Executive
Officer of the Company). Lipha will designate Dr. Rudi D. Neirinckx as President
and Chief Operating Officer of the Company. Dr. Neirinckx has been the Head of
Business Development at Merck KGaA. Mr. Sawyer will remain the Chairman and
Chief Executive Officer of the Company. Lipha and its affiliates have agreed to
not engage in certain business combinations including the Company for a period
of three years, unless a majority of the three directors designated by the
Company's current board consent. Lipha will have certain rights of first refusal
to acquire equity stock of the Company in the event of future equity offerings.
Merck KGaA and its affiliates have, as a result of and subject to the
closing of the transactions announced today, the right to purchase approximately
46% of the Company's common stock. The completion of the transactions with
Lipha, Merck KGaA and Genpharm are subject to certain conditions in the stock
purchase agreement, including the obtaining of all necessary government
consents, approval by the Company's stockholders of the issuance of the common
stock and the election of the designated directors. The distribution agreement
is effective immediately, but is terminable by Genpharm if the stock transaction
does not close by July 15, 1998 and is not subject to such conditions.
Kenneth I. Sawyer, Chairman, Chief Executive Officer and President of
Resources, commented, "The strategic alliance with Merck KGaA provides the
Company with the opportunity to achieve our objective of building a profitable
generic pharmaceutical business with the prospect of future growth. The alliance
will immediately add a significant number of products to our product development
pipeline, give the Company additional expertise in generic pharmaceutical
marketing and manufacturing, and significantly reduce the Company's debt while
providing capital to explore additional options to improve the Company's growth
prospects. We believe in order to compete in today's intensely competitive
generic drug market it is important to form strategic alliances and we feel
extremely fortunate to form an alliance with a company of Merck's heritage,
expertise and performance in the industry."
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"This is a further step to implement our North-American strategy by
increasing our presence in the world's largest pharmaceutical market" said Prof.
Dr. Bernhard Scheuble, designated Head of Merck's Pharmaceutical Business and
Deputy Member of the Executive Board. "In the US we have seen a very successful
introduction of our betablocker Concor (bisoprolol) and the antidiabetic
Glucophage (metformin) through licensees. This agreement now marks the start of
becoming a major player in the US generics industry."
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Merck KGaA is a German specialty pharmaceuticals, laboratory and chemicals
company with sales of $4.4 billion, and 29,000 employees in 47 countries
worldwide. Its pharmaceutical sales of $2.5 billion consists mainly of ethicals,
generics, contrastmedia and OTC products. Within the Ethicals Division Merck
spends more than 20% of its sales on R&D and has core research expertise in CV,
CNS, oncology and metabolic disease. Merck KGaA owns Merck-Lipha S.A., a French
ethical and generic pharmaceutical company, which owns Dey Laboratories, L.P., a
U.S. generic pharmaceutical company located in Napa Valley, California.
Pharmaceutical Resources, Inc. is a holding company with subsidiaries that
develop manufacture and distribute generic pharmaceuticals products. PRI's
principal subsidiary, Par Pharmaceutical, located in Spring Valley, New York,
manufactures and distributes various dosage strengths of approximately 100
products.
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