June 26, 2009 / 9:23 AM / 11 years ago

UPDATE 1-EU agency backs new J&J, Schering arthritis drug

* Simponi recommended by European Medicines Agency

* For rheumatoid arthritis and two other conditions

* Full EU approval expected in coming months

(Adds details, background)

LONDON, June 26 (Reuters) - Johnson & Johnson (JNJ.N) and Schering-Plough Corp’s SGP.N once-monthly drug Simponi has been recommended for approval in Europe to treat moderate to severe rheumatoid arthritis, the companies said on Friday.

Decisions by the European Medicines Agency are normally endorsed by the European Commission within a couple of months.

In addition to rheumatoid arthritis, the injectable drug also received a positive opinion for treating psoriatic arthritis and ankylosing spondylitis.

The potential blockbuster medicine is a follow-up to the widely used Remicade treatment sold by the two drugmakers. Simponi was approved in the United States and Canada in April 2009.

Simponi and Remicade both work by blocking tumour necrosis factor (TNF), an inflammation-causing protein.

The drugs are proving a high-stakes bone of contention in Merck & Co’s (MRK.N) planned $41 billion purchase of Schering-Plough, because Merck has said it will inherit overseas rights to the drugs.

Under an earlier marketing deal with J&J, Schering-Plough is obliged to return overseas rights to J&J if control of Schering-Plough changes.

Merck is slated to buy Schering-Plough later this year. But the deal was structured as a “reverse merger,” meaning Schering-Plough technically would acquire larger Merck even though Merck is paying it $41 billion.

The strategy would allow Schering-Plough to claim it is a continuing enterprise and therefore has not undergone a change in control that would force it to give up overseas rights to the two arthritis drugs.

J&J has exclusive rights to sales in the United States. Schering-Plough has rights in most other markets.

Schering-Plough said in a filing last month J&J would seek to arbitrate an end to their drug partnership in the wake of the planned merger with Merck. (Reporting by Ben Hirschler; Editing by David Holmes)

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