Monday, October 11, 2010

Bizmology

Bizmology

Merck and Johnson & Johnson fight over Remicade

Posted: 11 Oct 2010 08:18 AM PDT

Merck and J&J are squaring off in one of the fiercest areas of pharmaceutical litigation — well, yes, there are many such areas, but in this instance the companies are battling over which party should control distribution rights for a top-selling medication.

J&J historically shared marketing rights to arthritis drug Remicade with Schering-Plough, which was acquired by Merck & Co. last year. Merck structured the acquisition as a reverse merger (meaning that Schering-Plough was the surviving legal entity but was renamed Merck after the deal) — a move that was widely perceived to be a blatant attempt to wiggle past a change-of-control contingency in the Remicade agreement.

J&J has, of course, filed suit objecting to the move, and if courts decide that the acquisition did constitute a change in control, it could cause the co-marketing deal to terminate and full rights to revert back to J&J, leaving Merck in the dust. Hence the fierce legal battle, with each side hoping to come out ahead of the game.

The two pharma giants are going head-to-head over rights to Remicade (and its next-generation version Simponi, which is speculated to be a potentially larger success) during a time when all of the heavy hitting drugmakers are struggling to keep their pipelines full of blockbuster sellers. Sales of Remicade reached about $6 billion last year and future annual revenues from Simponi could be even higher. Despite the fact that J&J and Merck make $62 billion and $27 billion in annual revenues, respectively, every drug counts as the threats of patent expirations and generic competition loom and products drop from blockbuster status to legacy staples on a regular basis.

Federal arbitrators are expected to make a decision on the case at the end of the month. Despite the obvious intent behind its reverse merger structure, Merck was fastidious enough in completing the transaction that it has a decent chance of keeping its international marketing rights to the drugs. J&J could also very well succeed in taking full control of the products; however, there is still a slim chance that the firm will choose to negotiate with Merck, which could create a settlement agreement that would be mutually beneficial for the companies.

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Photo by Aislinn Ritchie, used under a CC-Share Alike license.
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