The showdown over Remicade approaches. Johnson & Johnson and Merck will tussle over rights to the blockbuster anti-inflammatory drug--and its successor Simponi--in arbitration later this month. At stake: Some $2.7 billion in annual revenues. At issue: Whether J&J's original marketing agreement with Schering-Plough survived its merger with Merck.
Under that agreement, Remicade rights would revert to J&J if Schering underwent a change in control. Knowing this, Merck structured its deal with Schering as a "reverse merger," in which Schering technically bought Merck, but changed its name to Merck and kept Merck's CEO.
That technicality may or may not hold water with the arbitration panel of three former federal judges. Sure, it's all there in the fine print: Merck suffered a change in control, not Schering; Schering was the buyer, not the seller. But as BNet Pharma points out, the reverse merger was enough of a "change in control" to trigger Schering CEO Fred Hassan's (photo) $50 million golden handshake.
Remicade is now Merck's second-biggest drug. If it has to say goodbye to those revenues--just as it did to Fred Hassan--one of its reasons for buying Schering in the first place will have vanished. And Merck's stock price would suffer, angering investors.