After recalls, Merck sells out of J&J OTC venture for $175M

Merck ($MRK) is stepping out of a consumer-drugs partnership with Johnson & Johnson ($JNJ). After quality issues at one of the 50-50 joint venture's plants spurred recalls of Pepcid and Mylanta products, Merck sold its interest to J&J for $175 million, giving up the rights to market Pepcid, Mylanta, Mylicon and other common over-the-counter drug brands in the U.S. and Canada.

Merck says it's selling out of the 22-year-old JV so it can focus more tightly on its own wholly-owned consumer drugs operation, which it acquired along with Schering-Plough in 2009. "Termination of the JJMCP Merck greater freedom to operate in the OTC consumer sector," the company said in a statement, adding that it aims to "fully exploit" its pipeline of prescription-to-OTC conversions and "actively pursue" OTC licensing.

The company doesn't mention the problems at the JV's plant in Lancaster, PA. In July of last year, the FDA cited quality-control shortfalls at the plant, and soon after, some Pepcid and Mylanta products made there were recalled. One problem was that different products--for instance, mint-flavored and berry-flavored Pepcid--were packaged together, touching off consumer complaints, Reuters notes.

Of course, the Pepcid recalls were among many for J&J's McNeil consumer healthcare division last year. J&J lost $900 million in sales because of the recalls and quality problems in 2010, and analysts expect another $1 billion in related losses for 2011.

- see the release from Merck
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