Schering-Plough has confirmed in a filing to US regulators that Johnson & Johnson plans to seek arbitration as to whether it can terminate the firms’ marketing agreement covering the rheumatoid arthritis and Crohn’s disease blockbuster Remicade now that S-P is merging with Merck & Co.
The two companies have a distribution agreement which sees J&J’s Centocor unit sell Remicade (infliximab) in the USA, while S-P markets the drug elsewhere. The pact also includes the recently-approved arthritis treatment Simponi (golimumab).
The agreement can be terminated if a “change of control” occurred at S-P but the firm and Merck claim that their proposed deal is structured as a reverse merger, allowing S-P to remain as a surviving entity. A lot of cash is at stake as Remicade generated about $2.1 billion in sales for S-P last year.
J&J noted that “as its public statements make clear”, Merck is acquiring S-P and “the acquisition constitutes a change of control”. As such, it triggers the healthcare giant’s right to terminate the partnership so J&J will commence arbitration “seeking the return of full rights” to Remicade and golimumab.
In the 313-page filing to the US Securities and Exchange Commission, Merck and S-P said in the SEC filing they would “vigorously contest any attempt by Centocor to terminate the distribution agreement”. S-P added that “due to the uncertainty surrounding the outcome of any threatened or actual arbitration proceeding…the parties may choose to settle a dispute under mutually agreeable terms”.
S-P and Merck concluded by saying that any change to the relationship with J&J will not have a “material adverse effect” on the credit agreements that have been put in place to finance the proposed merger.
