Merck & Co, J&J take Remicade rights battle to US arbitration
This article was originally published in Scrip
Johnson & Johnson's dispute with Merck & Co over rights to the TNF-inhibitor Remicade (infliximab), and the follow-on agent Simponi (golimumab), is slated to go before an arbitration panel at the end of September.
In a regulatory filing, Merck said that the hearing will take place before a three-judge panel in New York. It is expected to last no more than 12 business days. "The panel is expected to make a determination within 20 days of the conclusion of the arbitration hearing although that determination could be delayed by mutual agreement," the filing said.
The issue revolves around who will retain full rights to the biologicals. Remicade is one of Merck's biggest products, and had $669 million in the sales for the second quarter of 2010. Merck claims it acquired the rights to the product outside the US through its merger last November with Schering-Plough, which had sold the product for years through a marketing distribution agreement with J&J. Schering-Plough acquired the distribution rights to Remicade outside the US under an agreement signed with Centocor in 1998 before J&J acquired it. J&J's Centocor Ortho Biotech unit sells the product in the US.
J&J believes that its long-standing pact for co-marketing the drug was terminated by Merck's takeover of Schering-Plough. J&J is arguing that Schering-Plough's rights to distribute the drug should have reverted back to it under a change-of-control provision in the original agreement. As the merger was progressing, it delivered a notice to Merck that formally initiated the arbitration proceeding (scripintelligence.com, 26 May 2009). The Remicade deal provides for binding arbitration to settle disagreements.
For its part, Merck has claimed that the acquisition of Schering-Plough involved a complex strategy involving a reverse merger, in which ownership of Schering-Plough did not change hands; Schering-Plough was the "surviving" legal entity, even though it retained Merck's name, leadership and headquarters. In this manner, Merck argues that there was no change in the control as described in the distribution agreement.
Even as the merger was moving forward, Merck's CEO Richard Clark told investors that that deal was designed such that a reverse merger would mean that the Schering-Plough rights would remain intact. The company's general counsel had also expressed the same confidence that the takeover would not violate the J&J agreements.
In its regulatory filing, Merck says J&J is claiming damages "in an amount to be determined" and that if it loses, the case could have a "material adverse effect" on its financial position. It also cited the possibility that, due to uncertainty in the arbitration proceeding, the case could be settled, but in a manner that would "reduce the benefits" of the distribution agreement on the two products.
Golimumab is Centocor's next-generation, human anti-TNF monoclonal antibody, which has been approved in the US and the EU.