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Merck, J & J Settle Multibillion Dollar Dispute

Drug makers Merck and Johnson & Johnson reached a deal to end an arbitration dispute over rights to two lucrative drugs for immune disorders.

WHITEHOUSE STATION, New Jersey (AP) -- Drug makers Merck and Johnson & Johnson said Friday they've reached a deal to end a multibillion dollar arbitration dispute over rights to two lucrative drugs for immune disorders.

Merck & Co. will pay J&J $500 million, and the companies will divide distribution rights outside the United States for Remicade and successor drug Simponi, which treat chronic inflammatory diseases like rheumatoid arthritis.

Starting July 1, J&J receives exclusive marketing rights for the drugs in Canada, Central and South America, the Middle East, Africa and Asia Pacific territories. Merck will retain rights through Europe and the emerging markets Russia and Turkey. It will divide the profit from those territories with J&J.

J&J keeps its rights to distribute the drugs in the United States.

The drugs generated about $2.8 billion in revenue for Merck last year, and the Whitehouse Station, New Jersey, company said the territories it retains generated about 70 percent of that total.

J&J, based in New Brunswick, New Jersey, received about $4.8 billion in revenue from the drugs last year, including $1.2 billion in sales to distribution partner Merck.

Schering-Plough had divided revenue with J&J before Merck bought Schering-Plough in 2009. Revenue from those drugs was a key reason Merck bought Schering-Plough in a $49.6-billion deal. But Johnson & Johnson argued even before the deal was concluded that it amounted to a change in control of Schering-Plough, which would allow J&J to terminate their revenue-sharing agreement.

J&J had started an arbitration bid to gain all global revenue from the drugs, but the companies reached an agreement before arbitrators could rule.

The companies said the agreement is not expected to have a significant impact on earnings this year. Merck said it still expects 2011 adjusted earnings, which exclude the Johnson & Johnson payment and other one-time items, to range from $3.64 to $3.76 per share.

Analysts surveyed by FactSet expect, on average, earnings of $3.71 per share. Analysts typically exclude one-time items from their estimates.

J&J shares climbed 13 cents to $60.15 in premarket trading, while Merck rose $1.04, or 3.1 percent, to $34.90.

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