Merck in $5 Billion Buyback Deal With Goldman Sachs

Merck lab
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Merck lab

Merck said it has entered into a $5 billion share repurchase agreement with Goldman Sachs, as the drug giant looks to prop up shareholder value in face of stiff competition from makers of less-costly generics.

Under the accelerated share repurchase agreement (ASR), Merck has agreed to repurchase about 99.5 million shares from Goldman Sachs based on current market prices.

"We don't have consensus share count post-Q1 earnings to quantify the impact of the accelerated repurchase, but we believe this is a positive sign of Merck attempting to create shareholder value," ISI Group analyst Mark Schoenebaum said in a note to clients.

(Read More: Merck Reports Disappointing Sales, Cuts Forecast)

Merck's board had authorized additional purchases of up to $15 billion of its common stock and said that it would buy back about $7.5 billion over the next 12 months.

Sales of Merck's asthma drug Singulair plunged 75 percent to $337 million in the first quarter. The pill was Merck's biggest product, with annual sales of $6 billion, before cheaper generics flooded the U.S. market last August.More pain from generics is in store. Merck's Maxalt migraine drug recently lost patent protection and its Temodar brain cancer medicine will soon face cheaper copycats.

Merck aims to seek marketing approval this year for a handful of new drugs, including a sleep aid called suvorexant now before U.S. regulators. It is counting on these products to help offset plunging sales of Singulair, Maxalt and Temodar.