Merck, Schering-Plough Set Meetings On Merger

That's being done in an effort to retain roughly $2.1 billion in annual revenue that Schering-Plough now gets from a partnership with Johnson & Johnson on global sales of the blockbuster arthritis drug Remicade, and a successor drug called Simponi recently approved.

Johnson & Johnson, of New Brunswick, N.J., is arguing the merger constitutes a change in control, which would permit its biotech division, Centocor, to terminate their distribution agreement and retain all revenue from the drugs. Centocor has started an arbitration proceeding to resolve the dispute.

According to the SEC filings, Schering-Plough is "vigorously contesting" Centocor's attempt to end the distribution deal, and the combined company will continue to do so. Merck officials have said that the arbitration process, which could take nine to 12 months, will not hold up the merger. It is expected to close in the fourth quarter.

"Under the plain reading of (the change-in control) provision, Merck and Schering-Plough believe that completion of the merger will not entitle Centocor to terminate the distribution agreement," the proxies state. "Due to the uncertainty surrounding the outcome of the arbitration, the parties may choose to settle the dispute under mutually agreeable terms," which could reduce future revenue to the combined company.