September 7, 2010 / 2:46 PM / 8 years ago

UPDATE 2-Merck sees fast ruling in J&J Remicade arbitration

* Expects proceeding to begin in late September

* Sees it lasting no more than 12 business days

* Expects decision within 20 days after proceeding ends

* Merck, J&J shares little changed (Adds approved uses of drugs, potential financial damages)

By Ransdell Pierson

NEW YORK, Sept 7 (Reuters) - Merck & Co said an arbitration panel would look in late September at whether the company is entitled to overseas rights to Remicade and Simponi, Johnson & Johnson’s (JNJ.N) important rheumatoid arthritis drugs.

Merck (MRK.N) has said it acquired those rights to the drugs with its $41 billion purchase of Schering-Plough Corp last November.

In a regulatory filing, Merck said the arbitration involving blockbuster arthritis treatment Remicade and a potentially lucrative newer drug called Simponi would take place in New York and probably last no more than 12 business days.

Both Remicade and Simponi are also approved to treat psoriatic arthritis. That condition involves arthritis which is accompanied by psoriasis — red and inflamed patches of skin that are linked to overactive immune systems.

Wall Street had expected the panel of three former federal judges to take up the matter this month. The panel will probably render its decision within 20 days after concluding the proceeding, although the determination could be delayed by mutual agreement of the companies, Merck said on Tuesday.

During the second quarter, Merck reported $669 million in sales from Remicade, making it one of the drugmaker’s biggest products. It is rolling out Simponi in overseas markets, and some analysts believe the once-monthly treatment also has blockbuster sales potential.

Schering-Plough had sold Remicade for years under a marketing pact with J&J that also gave it overseas rights to Simponi. But the deal required Schering-Plough to hand back the sales rights to J&J if the smaller drugmaker underwent a change of control.

That requirement became clouded, however, when the Schering-Plough/Merck deal was structured as a reverse merger — which technically means Schering-Plough bought the larger company even though the combined entity retained Merck’s name and CEO.

J&J challenged the reverse-merger logic by formally initiating the arbitration proceeding in May 2009.

Aside from potentially losing its overseas marketing rights, Merck said on Tuesday that it could also be liable for yet-unspecified damages should J&J prevail in the dispute.

Shares of Merck were up 1 cent at $35.60 in afternoon trading on the New York Stock Exchange, while J&J fell 11 cents to $58.82. (Reporting by Ransdell Pierson, editing by Maureen Bavdek and Lisa Von Ahn)

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