J&J Wants Remicade Damages From Merck
2 CommentsBy Ed Silverman // September 7th, 2010 // 10:34 am
As a widely anticipated arbitration hearing nears, Johnson & Johnson is demanding unspecified amount of damages in addition to ending a partnership to sell the Remicade and Simponi rheumatoid arthritis treatments, according to a Merck filing with the US Securities and Exchange Commission.
At issue are rights to Remicade, which generated $5.5 billion in sales last year, and the newer Simponi follow-up. After Merck bought Schering-Plough, with which J&J had a co-marketing agreement, J&J claimed the takeover canceled their deal, citing a change-of-control provision. J&J subsequently filed for arbitration, which should last 12 business days with a ruling 20 days later, according to Merck.
For its part, Merck claimed its takeover was really a reverse merger that was designed to avoid this conflict over the change-of-control language. Of course, as J&J has noted, the surviving entity has the Merck name on the front door, the Merck board is in control and operations are run from Merck headquarters in Whitehouse Station, NJ. In other words, if it walks like, talks like a duck….quack.
In its filing, Merck says J&J’s Centocor unit is claiming damages “in an amount to be determined,” and that if its loses, Merck could “suffer an impairment charge,” and have a material adverse effect” on its financial position and operations. A settlement, however, remains possible.
Condor
So — the central takeaway?
Even if Merck wins — on EVERY count in the arbitration — all it will do is preserve the “status quo“. That is, Merck will get to keep the revenue. There is thus no upside surprise for Whitehouse Station.
Importantly, the “downside” — in a loss scenario — looks to be between $4 billion and $10 billion, in the next three years — of very high-margin revenue.
Wow.
Bing Lam
By estoppel,the reverse merger tactic is a clear demonstration of bad faith on the part of Merck in dealing with the Remicade rights .Merck is clearly the controlling company as demonstrated in all its actions in the public domain. You can scrutinize all you can , you will find evidence of total Merck control in the surviving company. It would be interesting to see how the arbitration panel view all the evidence. Merck should have settled rather go for arbitration.