J&J brings arbitrators into Remicade dispute

It's official: Johnson & Johnson has asked official arbiters to let it abandon its Remicade partnership with Schering-Plough. J&J contends that the Merck/Schering merger amounts to a "change in control," which would allow it to terminate the joint distribution deal that covers the blockbuster anti-inflammatory and its new sibling treatment Simponi. "The termination of the agreements would return full rights to Johnson & Johnson for the distribution of these products," the company said in a statement, "in markets outside the United States where Schering-Plough currently has the rights to distribute these products."

Naturally, Merck and Schering-Plough are having none of this. Their combo deal is a "reverse merger," designed as such to avoid triggering that change-in-control provision. The companies say in a statement that they are "fully prepared to arbitrate the matter and to vigorously defend their rights." And they say that that arbitration won't prevent their merger from wrapping up as planned, because the deal expressly excludes the Remicade partnership from the "material adverse effect" provisions that could negate the deal or mess up any financing arrangements.

Clearly, then, Merck and Schering were expecting J&J to balk, as were most observers. The companies' news release hints at another expectation: that they can negotiate a settlement with J&J. "[T]he initiation of the proceedings does not preclude a negotiated settlement," the statement says. Will J&J be as eager to strike a deal, or will it hold out for the independent arbitrator's decision?

- see the J&J statement
- read the Merck/Schering release
- check out the story from Dow Jones

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