Merck to Deal Nexium® Back to AZ By 2012, For One-Year's Worth of Sales?

Per the morning's online Wall Street Journal; more in a few moments, but this means that Merck's $1.4 billion of annual Nexium^® revenue might be transferred back to AstraZeneca by 2012, for as little as one-half of one year's revenue, or as much as one years' worth of revenue. That is the sweetheart deal for AZ, embedded in the upfront $647 million being paid to Merck in April 2010, on the other smaller product lines now returning to AstraZeneca:

. . . .The exercise price for the second option is the net present value of the future annual contingent payments on Prilosec and Nexium as determined at the time of exercise. . . .

AstraZeneca made contingent payments in respect of Prilosec and Nexium amounting to $726 million in 2009. . . .

Recall that per Merck's last SEC-filed Form 10-Q, the Nexium "pay for delay" patent settlement with Ranbaxy is under investigation by DoJ and FTC, for unlawful anticompetitive effects: That is, despite the Nexium "at risk" launch window opening in April of 2008, Ranbaxy and Merck (along with partner AstraZeneca) entered a settlement agreement keeping a generic form of Nexium off the market until May of 2014 (Page 44 of the 10-Q):

". . . .The United States Federal Trade Commission (the "FTC") is now formally investigating this settlement agreement -- looking into, among other matters, its potential for improper anticompetitive effects. In that regard, Merck and AstraZeneca each received an investigative document demand from the FTC -- in July 2008 -- regarding the settlement agreement with Ranbaxy. . . ."

This proposed transfer back to AstraZeneca would not change any ultimate civil or criminal governmental liability, for prior acts, related to Merck, under long-standing DoJ prosecution rules. The allegedly unlawful conduct occurred on Merck's watch, and under its joint control. See the bottom of page 51 of the just-filed Merck SEC Form 10-K, for an abbreviated update on this matter. This pretty-fairly valued deal for the transfer of a generic version of felodipine payments by AZ, looks to be a smoke-screen, and cover, for the underlying Nexium sweetheart deal, in my opinion.