UPDATE 2-Merck/J&J Remicade rights ruling now seen in 2011

* Remicade/Simponi arbitration hearing concluded

* Merck had been expecting decision much sooner

* Billions at stake from overseas rights
(Adds sales figure, background, possible outcomes, share
prices, byline)

By Bill Berkrot

NEW YORK, Oct 14 (BestGrowthStock) – A decision by an arbitration
panel on the overseas sales rights to the blockbuster
rheumatoid arthritis drug Remicade, and potentially more
lucrative follow-up medicine Simponi, is not likely to come
until next year, Merck & Co (MRK.N: ) said on Thursday.

Merck, in a regulatory filing, said the high-stakes hearing
before an arbitration panel of former federal judges that pits
Merck against Johnson & Johnson (JNJ.N: ) has concluded. The two
sides will now file post-hearing briefs and present arguments
to the arbitration panel in late December, Merck said, with a
final decision likely sometime in 2011.

The company had previously said it expected a ruling within
20 days of the conclusion of the arbitration hearing.

“Both sides and the arbitration panel agreed to a change in
the process that provides more time,” Merck spokesman Steven
Campanini said.

At issue is whether Merck’s $41 billion acquisition of
Schering-Plough last year constituted a change of control at
Schering that would cede the lucrative overseas Remicade and
Simponi rights back to J&J, which owns the drugs and sells them
in the United States.

Merck reported $669 million in second-quarter sales from
Remicade, making it one of its biggest products. And Simponi is
expected by many analysts to become an even bigger seller with
the added advantage of many more years of patent life than the
older medicine.

At the heart of the dispute is the merger of Merck and
Schering-Plough, which was cleverly designed to enable Merck to
retain the Remicade overseas rights.

The companies went to great lengths to structure the deal
as a reverse merger under which the smaller Schering-Plough
technically acquired Merck. But the combined entity retained
the Merck name and stock symbol, and is run by Merck Chief
Executive Dick Clark.

J&J has maintained that in reality it was a traditional
acquisition by the larger company and a clear change of control
at Schering-Plough, whose chief executive, Fred Hassan, left
soon after the merger was completed.

Until the arbitration panel rules, the current distribution
deal remains in effect. While that could extend the time Merck
can keep collecting Remicade revenue under the current terms,
it could also increase the amount of damages Merck might be
forced to pay should the arbitration go against it.

The additional time could allow the sides further chance to
reach a mutually beneficial settlement and avoid a ruling that
would be final and binding. Some industry analysts have said
they believe that will still happen.

But Merck and J&J had several months to nail down a
compromise prior to the start of the hearing and they appear to
have shown little inclination to do so.

“The termination of the agreements would return full rights
to Johnson & Johnson for the distribution of these products in
markets outside the United States where Schering-Plough
currently has the rights to distribute these products,” J&J
said in a statement prior to the panel hearing.

There are three basic potential outcomes from the
arbitration: A ruling returning the rights to J&J that may also
include damages to be paid by Merck; a finding that the merger
did not constitute a change of control, which would keep the
current Remicade/Simponi distribution deal in place; or some
form of middle ground that would allow Merck to continue
selling the drugs overseas under altered terms, such as higher
royalties being paid to J&J.

Merck shares were up 5 cents at $37.21, while J&J shares
were up 2 cents at $63.60, both on the New York Stock
(Reporting by Bill Berkrot, editing by Gerald E. McCormick,
Dave Zimmerman)

UPDATE 2-Merck/J&J Remicade rights ruling now seen in 2011