TRENTON, N.J. (AP) - Drugmaker Merck & Co. said Tuesday that arbitration will begin in late September in its dispute with Johnson & Johnson over revenue from two blockbuster drugs for rheumatoid arthritis and other immune disorders.
The dispute arose when Merck bought Schering-Plough Corp., which has shared billions in revenue with J&J from Remicade and a successor drug, Simponi.
Merck structured its purchase of Schering-Plough as a reverse merger, meaning that Schering-Plough technically was the surviving corporation. That was an attempt to block change-of-control provisions in Schering's contract with J&J.
Johnson & Johnson has argued that those provisions are in force and that it is entitled to Schering-Plough's share of revenue from the drugs _ roughly $2 billion a year _ plus damages.
In May, J&J's biotech subsidiary Centocor informed Merck it was initiating an arbitration proceeding, as investors had expected. Both companies have kept mum about the dispute, but Merck's general counsel, Bruce Kuhlik, told analysts on a July 30 conference call he hoped to provide additional information soon.
In a filing with the Securities and Exchange Commission Tuesday, Merck said that the arbitration case would be heard in New York City by a panel of three former federal judges, whom it did not identify. The hearing is expected to last up to 12 business days and the panel is then expected to make a decision within 20 business days after that.
"We continue to believe very strongly that we've structured this transaction in a way that's appropriate for the Remicade distribution agreement," Kuhlik told analysts in July.
Merck wrote in the SEC filing that it is being represented by attorneys William Ohlemeyer, Scott Vernick and David Boies. Boies is the high-profile lawyer who represented former Vice President Al Gore in litigation over the results of the 2000 presidential election and was special counsel for the Justice Department in its antitrust suit against Microsoft.
Johnson & Johnson is being represented by the firm Patterson Belknap Webb & Tyler LLP, Merck reported Tuesday. J&J officials did not return a call seeking comment.
Merck noted the two companies could decide to resolve the dispute privately _ an outcome some analysts have predicted _ but that could mean a change in how the companies split proceeds from the drugs. J&J already gets the larger share, posting $4.3 billion in sales from Remicade alone last year; it did not report separate sales from then-new Simponi.
Merck bought Schering-Plough for $41 billion last November, one of several major pharmaceutical mergers in 2009. The deal was part of Merck's strategy to diversify by adding Schering's businesses in biologic drugs, veterinary medicine and consumer health products, plus several promising experimental drugs Schering-Plough has been testing.