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April 18, 2011
Merck and J&J Finally Come to Terms
So the long-delayed settlement between Merck and J&J has finally been announced. The drawn-out process had everyone speculating that some sort of deal was in the works, and so it's proved:
Under the resolution, Merck must relinquish its rights to sell Remicade in Canada, Central and South America, the Middle East, Africa and the Asia Pacific effective July 1. The lost territories represent about 30 percent of Merck’s 2010 Remicade revenues.
Merck retains the ability to sell the arthritis medicine across Europe, Russia and Turkey, where it generated 70 percent of its 2010 Remicade revenue. Beginning in July, however, Merck will begin sharing its profits equally with Johnson & Johnson. . .
In a research note, Tim Anderson, an analyst with Bernstein Research, pointed out that while Merck is retaining most of its ex-U.S. franchise, it is giving up the product in markets where the growth rate has been — and is likely to remain — higher.
Merck's stock went up a bit on the news, probably from relief that the whole issue has finally been worked out. But this really can't be seen as a plus for Merck - back when they acquired Schering-Plough, those Remicade revenues were supposed to be a good part of the package. Thus all that SP-buys-Merck charade, all of which looks pretty ridiculous now.
So was I off base in my prediction that Merck would come out the loser? Matthew Herper has a more positive view of the outcome than I do. At any rate, finally resolving the whole dispute is worth quite a bit to both companies. But what did all this accomplish, in the end, except giving the lawyers something to do?
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