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J&J plans to arbitrate Remicade pact

http://www.reuters.com/article/innovationNews/idUSTRE54J7KB20090520

PHILADELPHIA (Reuters) - Schering-Plough Corp (SGP.N: Quote, Profile, Research, Stock Buzz) said on Wednesday that Johnson & Johnson (JNJ.N: Quote, Profile, Research, Stock Buzz) would seek to arbitrate an end to their Remicade drug partnership in the wake of Schering-Plough's planned merger with Merck & Co Inc (MRK.N: Quote, Profile, Research, Stock Buzz).

In a filing with the U.S. Securities and Exchange Commission, Schering-Plough said Johnson & Johnson notified it on May 5 that it planned to arbitrate whether it had the right to terminate the Remicade arthritis distribution agreement due to the planned merger.

Schering-Plough years ago acquired the rights to Remicade and another arthritis treatment, golimumab, from diversified healthcare company Johnson & Johnson, which sells Remicade in the United States. Golimumab is awaiting approval in Europe.

If Schering-Plough had faced a change-of-control, such as a buyout, certain provisions in the licensing deal would prevent Merck from taking over overseas rights. However, since Merck's acquisition of Schering-Plough is structured as a so-called "reverse merger," Merck has said the Remicade partnership would be unchanged.

Merck has previously said Schering-Plough's rights to Remicade and golimumab would not be affected by the merger.

Johnson & Johnson did not immediately return calls seeking comment.

Merck and Schering-Plough said in the SEC filing they would "vigorously contest" any attempt by Johnson & Johnson to terminate the distribution agreement.

Remicade, used to treat arthritis, as well as, Crohn's disease, generated about $2.1 billion in sales in 2008.

Due to the uncertainty surrounding the outcome of any threatened or actual arbitration proceeding, Merck and Schering-Plough said "the parties may choose to settle a dispute under mutually agreeable terms."

The loss of Remicade sales would not trigger a "material adverse change" in Schering-Plough's financial prospects and would not threaten the merger deal with Schering-Plough.

Separately, Schering-Plough said it had previously held talks for a potential merger with an unnamed company, but it never received an takeover offer.

The talks were held while Schering-Plough was in negotiations with Merck, but broke off after the unnamed company decided it was "not in a position at that time to make a proposal for a business combination, according to the SEC filing.