Merck & Co and Johnson & Johnson settle long-running battle over Remicade and Simponi marketing; J&J eyeing Swiss acquisition

US drug majors Merck & Co) and Johnson & Johnson (NYSE: JNJ) and its subsidiary Centocor Ortho Biotech Inc have reached finally agreement to amend the distribution rights to Remicade (infliximab) and follow-on drug Simponi (golimumab), which treat chronic inflammatory diseases such as rheumatoid arthritis.

This accord concludes the arbitration proceeding J&J initiated in May 2009, requesting a ruling related to the distribution agreement following the announcement of the proposed merger between Merck and Schering-Plough. The news was welcomed by the market, with Merck’s shares rising 3% to $34.95 and J&J up 1% to $60.62. The two drugs generated $2.8 billion in sales for Merck last year, and about $4.8 billion for J&J.

Under the terms of the amended distribution agreement, Merck's subsidiary, Schering-Plough (Ireland) will relinquish exclusive marketing rights for Remicade and Simponi J&J’s Janssen pharmaceutical companies in territories including Canada, Central and South America, the Middle East, Africa and Asia Pacific (“relinquished territories”), effective July 1, 2011. Merck will retain exclusive marketing rights throughout Europe, Russia and Turkey (retained territories). The retained territories represent about 70% of Merck's 2010 revenue of around $2.8 billion from Remicade and Simponi, while the relinquished territories represent approximately 30%, or some $840 million. Marketing rights to both products in the all important US market are held by J&J, and this is not affected by the new settlement.