updated 8/7/2009 2:45:53 PM ET 2009-08-07T18:45:53

Shareholders of drugmakers Merck & Co. and Schering-Plough Corp. on Friday both overwhelmingly backed a $41.1 billion tie-up to create the world's No. 2 pharmaceutical company.

The acquisition of smaller Schering-Plough allows Merck, the world's eighth-biggest drugmaker by prescription medicine sales, to leapfrog to No. 2 worldwide, just behind Pfizer Inc. The new Merck would have about $42.4 billion in annual sales.

Merck and Schering-Plough already are partners on the blockbuster cholesterol drugs Vytorin and Zetia. The marriage will unite Merck's asthma and allergy treatment Singulair and cervical cancer vaccine Gardasil with Schering-Plough's allergy spray Nasonex and well-known consumer products including the Coppertone sun care line and Dr. Scholl's foot care items.

Buying No. 18 drugmaker Schering-Plough also boosts Merck's sagging pipeline of drugs in development, gives it a sizable biotech unit and creates a dominant player in vaccines as well as cholesterol, respiratory and women's drugs. And it allows the new company to slash costs — including roughly 15,000 jobs — to maintain profits as the industry deals with increasing generic competition and the unknown impact of health care reform.

Merck spokeswoman Amy Rose said 99.6 percent of the votes cast by Merck stockholders, or about 1.4 billion shares, supported the $41.1 billion purchase of Schering-Plough. The vote came at a special shareholders meeting Friday morning near Merck's headquarters in Whitehouse Station, N.J. Hours later, Schering-Plough stockholders also approved the deal almost unanimously, with about 99.1 percent of votes cast, or about 1.26 billion shares, supporting the deal.

The two companies still need approval from the regulators in the United States and other countries. They plan to close the deal in the fourth quarter.

Shares of both companies rose steadily Friday, starting right after news of the Merck vote result. In afternoon trading, Merck shares up were up $1.08, or 3.7 percent, at $30.44 and Schering-Plough shares were up 76 cents, or 2.9 percent, at $26.81.

The deal is structured as a reverse merger, meaning Kenilworth, N.J.-based Schering-Plough is technically the surviving company but will operate under Merck's better-known name.

That's an attempt to hold onto $2 billion a year in revenue Schering-Plough gets under its partnership with Johnson & Johnson to sell lucrative biotech drugs for rheumatoid arthritis and other immune disorders. J&J argues a change-of-control provision in its contract with Schering-Plough allows it to take all revenue from the drugs — Remicade and newly approved successor Simponi — and has started arbitration proceedings to press its suit.

Merck has removed what looked to be the only other significant hurdle to closing the deal, announcing plans last Thursday to sell its half-interest in the Merial animal health business to partner Sanofi-Aventis SA for $4 billion. That addressed antitrust concerns the U.S. Federal Trade Commission raised because Schering-Plough has its own large business selling medicines and vaccines for pets and livestock.

Merck still needs official clearance from the Federal Trade Commission and regulators in the European Union, Switzerland, Canada and China.

Rival Pfizer won't have to worry about the new Merck overtaking it as the undisputed industry leader soon after the merger. New York-based Pfizer is ensuring its dominance with a $68 billion deal to acquire Wyeth later this year.

In the year's third big pharmaceutical acquisition, Switzerland's Roche Group bought the part of California-based biotech pioneer Genentech it didn't own already for $47 billion in March.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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