Merck and Johnson & Johnson Reach Agreement on Distribution Rights to REMICADE and SIMPONI

Strategic Insights -

Merck and Johnson & Johnson have reached an agreement to amend the distribution rights to REMICADE and SIMPONI, two medications used to treat chronic inflammatory diseases such as rheumatoid arthritis. The agreement comes after an arbitration proceeding initiated by Johnson & Johnson in May 2009, following the announcement of the proposed merger between Merck and Schering-Plough. Under the terms of the amended distribution agreement, Merck will retain exclusive marketing rights to the medications in Europe, Russia, and Turkey, while Johnson & Johnson's Janssen pharmaceutical companies will take over exclusive marketing rights in Canada, Central and South America, the Middle East, Africa, and Asia Pacific.

Key Takeaways:

  • The agreement amends the distribution rights to REMICADE and SIMPONI, effective July 1, 2011, with Merck retaining 70% of the revenue from the medications, valued at approximately $2.8 billion in 2010.
  • The relinquished territories, where Johnson & Johnson will take over exclusive marketing rights, represent approximately 30% of the revenue.
  • Johnson & Johnson will receive a one-time payment of $500 million, effective in April 2011.
  • Merck will file the amended agreement on a Form 8-K with the Securities and Exchange Commission shortly.
  • The immunology field is a rapidly growing therapeutic area, and Merck expects to maintain a strong footprint through its retained interests in REMICADE and SIMPONI.
  • Johnson & Johnson will continue to increase access to the medications in the relinquished territories, with Merck ensuring a smooth transition for customers and patients.
  • Merck's subsidiary, Schering-Plough (Ireland), will relinquish exclusive marketing rights to REMICADE and SIMPONI in favor of Johnson & Johnson's subsidiary, Janssen pharmaceutical companies.

Statistics:

  • Revenue of REMICADE and SIMPONI in 2010: approximately $2.8 billion.
  • Revenue split between Merck and Johnson & Johnson: 58% to Merck and 42% to Johnson & Johnson, effective until 2014, when it will be equally divided.
  • Territories retained by Merck: Europe, Russia, and Turkey.
  • Territories relinquished to Johnson & Johnson: Canada, Central and South America, the Middle East, Africa, and Asia Pacific.
  • One-time payment to Johnson & Johnson: $500 million, effective in April 2011.

Sources:

  • Merck. "Merck and Johnson & Johnson Agree to Amend Distribution Agreement for REMICADE and SIMPONI." M2 PRESSWIRE, 18 Apr. 2011.
  • Johnson & Johnson. "Johnson & Johnson and Merck Reach Agreement on Distribution Rights for REMICADE and SIMPONI." M2 PRESSWIRE, 18 Apr. 2011.
  • Comtex SmarTrend Alert. M2 PressWIRE, 14 Apr. 2011.