Merck, known as MSD outside the United States and Canada, and Johnson & Johnson and its subsidiary Centocor Ortho Biotech Inc., have reached agreement to amend the distribution rights to Remicade (infliximab) and Simponi (golimumab), which treat chronic inflammatory diseases such as rheumatoid arthritis. This agreement concludes the arbitration proceeding Johnson & Johnson initiated in May 2009, requesting a ruling related to the distribution agreement following the announcement of the proposed merger between Merck and Schering-Plough.
Under the terms of the amended distribution agreement, Merck's subsidiary, Schering-Plough (Ireland) will relinquish exclusive marketing rights for Remicade and Simponi to Johnson & Johnson'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 approximately 70 per cent of Merck's 2010 revenue of approximately $2.8 billion from Remicade and Simponi, while the relinquished territories represent approximately 30 per cent. In addition, all profit derived from Merck's exclusive distribution of the two products in the retained territories will be equally divided between Merck and Johnson & Johnson, beginning July 1, 2011. In Japan, Indonesia, and Taiwan, Centocor Ortho Biotech Inc. will continue to license distribution rights to Remicade and Simponi to Mitsubishi Tanabe Pharma Corporation.
Under the prior terms of the distribution agreement, the contribution income (profit) split, which is currently at 58 percent to Merck and 42 percent to Centocor Ortho Biotech Inc., would have declined for Merck and increased for Johnson & Johnson each year until 2014, when it would have been equally divided. Johnson & Johnson will also receive a one-time payment of $500 million in April 2011. Merck expects to file the amended agreement on a Form 8-K with the Securities and Exchange Commission shortly.
“We are pleased to have reached this voluntary agreement and look forward to continuing to serve patients in need with Remicade and Simponi throughout Europe, Russia and Turkey,” said Kenneth Frazier, president and CEO of Merck. “The immunology field is a rapidly growing therapeutic area. Merck will have a strong footprint in this category through our significant retained interests in Remicade and Simponi, both of which will be important contributors to our overall portfolio. We also are committed to ensuring a smooth transition for customers and patients in the territories being relinquished, with no impact on product supply.”
Bill Weldon, chairman and CEO, Johnson & Johnson said, “We are pleased to have reached an amended agreement with Merck and expand our market-leading immunology portfolio on a global basis. These important medicines provide very meaningful benefit to the patients who depend upon them, and our first priority will be to ensure the continued availability of Remicade and Simponi to healthcare providers and patients around the world, while continuing to increase access. We are working closely with Merck to make certain this is a seamless transition in the relinquished territories.”