Saturday, February 20, 2010

On Tim Anderson's "Solution" For The September 2010 Remicade Arbitration

I think to be fair to the Sanford Bernstein analyst's point, in Jim Edward's (B|Net Pharma's) latest -- it should be mentioned that Tim Anderson of Sanford Bernstein probably meant handing off substantially all of the (legacy Schering-Plough) Consumer Health business franchises to Johnson & Johnson, in return for retention of at least some of the non-US distribution rights to Remicade and Simponi.

As Tim (and Jim) well know, the wrinkle here is the amount of overlap between J&J's consumer health offerings, and the New Merck's set of offerings. It would be more than a notion to try and clear this through the FTC's Hart-Scott (antitrust) review staffers. In any event, it is an interesting thought, per Jim Edwards:

. . . .[New Merck] could give Claritin and its other consumer brands to Johnson & Johnson (JNJ) in exchange for keeping some of its rights to Remicade, the $2.3 billion arthritis and psoriasis blockbuster that the two companies market jointly. [Ed. Note: Simponi likely doubles this franchise's size, over the longer term.]

That’s a speculative solution to the ongoing legal fight between Merck and J&J proposed by Tim Anderson, an analyst at Sanford Bernstein, in a recent note to investors.

The two companies are scheduled to enter arbitration in September. Anderson believes they’ll settle before then. . . .

I don't -- and I just don't see J&J making this Consumer Health swap deal.

Importantly, I think it unlikely that J&J will settle prior to (at least) seeing how the New Merck presentation to the arbitration panel (backgrounder there) plays out. If William Weldon feels his own case before the arbitrators is shaping up to be weaker than expected (based on the demeanor of the arbtrators, and the questions they ask), he can always offer an olive branch at the conclusion of the September 2010 hearing dates. That would be more in keeping with his negotiating style. He tends to want to see the other side's hand -- all cards, face up -- first. Then he makes deals. Consider here that, as the enigmatic "Company X" negotiator, in the SEC filings intitially disclosing the Merck-Schering-Plough transactions, Mr. Weldon (for J&J) ultimately up and walked away, without so much as making any firm offer -- after seeing quite a few "vest-held cards" -- i.e., due diligence materials.


Anonymous said...

Rainn - thanks for the posting. I LOVED THE GRAPHICS!! Ha ha ha ... you are indeed THE MAN! I "got it" Thanks for making my day better than it started. :)

Anonymous said...

Doesn't Merck have an agreement to switch prescription drugs to over the counter with Johnson & Johnson? The consumer business may not be valuable to Merck.