Inflamed Anti-Inflammatory Contract Revised

I love it when joint press releases sound all chummy as the companies try to hide their disdain in having to work with each other.

That was the case last week as Johnson & Johnson (NYSE: JNJ  ) and Schering-Plough (NYSE: SGP  ) announced they had revised their agreement for Schering to market REMICADE and J&J's next generation anti-TNF compound, golimumab, in countries outside of the U.S. and Asia. The new agreement gives Schering the right to sell the drugs for 15 years after the first golimumab commercial sale. Golimumab is currently in phase 3 testing for rheumatoid arthritis, psoriatic arthritis, and ankylosing spondylitis (inflammation of the spine).

If you're wondering why big old J&J needs relatively small Schering to market REMICADE to the rest of the world, the answer is that it doesn't. Schering licensed the rights to sell REMICADE -- and the option for golimumab -- from Centocor in 1998, the year before J&J bought the company.

In fact, J&J has been trying to get out of its agreement for a while, but last year, an arbiter decided that Schering had the right to sell golimumab for 15 years. It looks like J&J has finally given in.

Under the agreement, Schering has the right to independently develop and market golimumab for Crohn's disease in certain territories, and Centocor will have the option to participate in the program. The European market is fairly wide open since Elan's (NYSE: ELN  ) and Biogen Idec's (Nasdaq: BIIB  ) Tysabri was denied a label expansion. REMICADE and Abbott Laboratories' (NYSE: ABT  ) Humira are the only approved treatments.

The companies will also be developing an auto-injector device that allows patients to self-administer golimumab. The development will cost Schering $20.5 million this year but should pay dividends once the product is launched.

Shoring up the agreement is clearly an advantage for Schering. Its Schering's second most important partnership next to its cholesterol drug partnership with Merck (NYSE: MRK  ) , with sales of REMICADE coming in at almost $1.2 billion for the first nine months of the year. If golimumab can reach that kind of sales levels, Schering won't care what kind of tumultuous relationship it has with its partner.

More anti-inflammation Foolishness:

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