UPDATE: Merck In Talks For China Partnership >MRK

(Updates to focus on China partnership; adds new details and background; updates stock prices) By Peter Loftus Of DOW JONES NEWSWIRES Merck & Co. (MRK) said Tuesday it was in talks with China's Sinopharm Group Co. (SHTDF, 1099.HK) for a venture to market vaccines and potentially Merck drugs, which would represent Merck's first significant partnership in the huge, growing market. Merck and other Western drug companies are rushing to grab market share in emerging markets such as China and India. Rivals including Pfizer Inc. (PFE) and GlaxoSmithKline PLC (GSK) believe much of the industry's growth in coming years will be in these countries, as expanding middle classes gain better access to health care, and changes in lifestyle increase the prevalence of certain chronic diseases such as diabetes. Merck and Sinopharm announced Tuesday they signed a "statement of mutual intent," which Merck spokesman Ian McConnell described as a commitment to discuss possible business arrangements. For now, the focus of the talks is on the commercialization of certain vaccines in China, including Merck's vaccine against the human papillomavirus, or HPV, which is designed to protect against cervical cancer and other diseases. The vaccine, sold under the brand Gardasil in Western markets, isn't yet approved in China, McConnell said. Sinopharm's operations include China's largest bio-pharmaceutical manufacturing company and largest pharmaceutical distribution company, according to a press release. Merck has existing, in-house operations in China. The companies also will discuss the potential for promoting and marketing Merck's pharmaceutical products in China. Other companies have taken steps to expand share in emerging markets. Abbott Laboratories (ABT) recently agreed to acquire the generic-drugs unit of India's Piramal Healthcare Ltd. for $3.7 billion. Eli Lilly & Co. (LLY) has doubled its sales force in China and its venture-capital arm is investing $100 million largely in Chinese life-sciences companies. Separately, Merck and Sanofi-Aventis SA (SNY, SAN.FR) said Tuesday they will name Raul E. Kohan as chief executive for their proposed animal-health joint venture. Kohan is now president of Intervet/Schering-Plough, Merck's animal-health business, which will be wrapped together with Sanofi's similar Merial business to create the new Merial-Intervet animal-health joint venture. Sanofi and Merck said in March they would combine their two units, creating the world's biggest animal-health business, with more than $5 billion of revenue and roughly 29% of the global animal-health market. The venture is expected to get regulatory clearance by early next year. Kohan joined Schering-Plough, which was bought by Merck last fall, in 1984 and has since held positions of increasing responsibility. He "brings a wealth of animal health and global pharmaceutical industry experience" to the position, said Merck Chairman and Chief Executive Richard T. Clark. Jose Barella, executive chairman of Merial, will continue in his role until the deal closes. The companies didn't say what his position would be after that. Merck shares fell 2 cents to $35.25 in recent trading. Sanofi's American depositary shares fell 36 cents to $29.46. -Peter Loftus, Dow Jones Newswires; +1-215-656-8289; peter.loftus@dowjones.com (Nathan Becker contributed to this article) (END) Dow Jones Newswires July 27, 2010 11:09 ET (15:09 GMT)