J&J could put in spanner in the works for Merck & Co/S-P deal

The $41.1-billion acquisition of Schering-Plough by fellow US drug major Merck & Co (see full story page 3) could still result in a legal  challenge from health care giant Johnson & Johnson, which had also been  rumored to be a contender to buy S-P.

In announcing the details of the proposed transaction, it was revealed  that this would be a "reverse merger," although the name of the  combined firm would be Merck. The reason for this unusual move is that  S-P shares rights to one of its most lucrative drugs, the antiathritic  Remicade (infliximab) - which generated sales of $2.1 billion for the  company last year, as well as the late-stage developmental candidate  Simponi (golimumab) with J&J. Under a "change-of-control" clause in the  S-P/J&J agreement, the latter has the possibility to acquire the full  rights to these two drugs if the former is the subject of a takeover.  Clearly the reverse merger is intended to avoid this situation, but J&J  could well challenge the arrangement as being just a ploy to retain  commercialization of the compounds.

News of the deal on March 9 saw Merck's share price fall 7.7% to $20.99  and S-P's jump 14% to $20.13.