Big-profile Schering arthritis drug wins Canada nod

NEW YORK, April 13 (Reuters) - Johnson & Johnson and Schering-Plough Corp said on Monday that Canadian regulators had approved use of their experimental once-monthly drug Simponi to treat moderate to severe rheumatoid arthritis.

The potential blockbuster medicine, awaiting approval in the United States and Europe, is a follow-up to the widely used Remicade treatment sold by the two drugmakers.

Simponi could turn out to be 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 Simponi and Remicade. 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.

J&J JNJ.N has exclusive rights to sell the new injectable treatment in the United States. Schering-Plough, SGP.Nwhich has rights in most other markets, said it hopes to introduce Simponi in Canada during the second half of the year.

Canadian authorities also approved Simponi for active psoriatic arthritis, an inflammatory condition of the skin and joints, and ankylosing spondylitis, a chronic inflammatory arthritis of the spine.

Remicade, a decade-old drug given by intravenous infusion every eight weeks, which can cost more than $20,000 a year, also treats those three conditions. Like Simponi, it works by blocking tumor necrosis factor (TNF), an inflammation-causing protein.

In one large study, Simponi reduced arthritis symptoms by at least 20 percent among patients who had previously failed to benefit from standard anti-TNF medicines.

Researchers said it was the first time an anti-TNF medicine was shown to help patients who previously had failed to benefit from a member of the same family of drugs. Other big-selling anti-TNF treatments include Abbott Laboratories Inc's ABT.N Humira and Wyeth's WYE.N Enbrel.

“Simponi is the first biologic therapy to be approved concurrently in three distinct rheumatologic diseases,” the companies said in a release. The drug is also known by its chemical name, golimumab.

Merck is slated to buy Schering-Plough later this year.

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 could hold up the merger by trying to recover the overseas rights, according to some analysts, and thereby have leverage to exact concessions from Schering-Plough and Merck.

J&J has steadfastly declined to comment on the matter, but investors could get a glimpse of J&J’s game plan when the company reports first-quarter earnings on Tuesday. (Reporting by Ransdell Pierson; Editing by Toni Reinhold)