The Wall Street Journal - 29 July 1996
Laurie McGinley, Staff Reporter of The Wall Street Journal

John J. Gibbons, who is arbitrating an employment dispute between Mr. Millenson and the pharmaceutical giant, previously had ruled that Mr. Millenson had been wrongly fired as head of the division that produces the Confide kits. On Friday, in issuing his ruling on the remedy, he directed the New Brunswick, N.J., company to turn over to Mr. Millenson and his wife "all assets necessary to put them in actual operating control" of the business.

Mr. Gibbons said his order was dictated by an employment agreement that Mr. Millenson signed when he joined Johnson & Johnson in 1993 after developing the kits. In his ruling, the arbitrator quoted from Johnson & Johnson's own pretrial submission, which said that if Mr. Millenson were terminated without cause, he had the right to require the return of the Confide product to him and his wife. Among the assets the arbitrator said must be turned over to them are patents, laboratory equipment and the kits themselves.

Johnson & Johnson immediately struck back. On Friday, the company filed suit in state court in New Jersey, challenging the arbitrator's decision. "We think the arbitrator exceeded his authority," said a company spokesman, Jeffrey Leebaw. J. Alan Galbraith, Mr. Millenson's Washington-based attorney, said he expects a decision from the New Jersey court in the next few weeks.

Mr. Millenson and his wife, Wendy Strongin, developed the HIV test in the late 1980s. In 1993, they sold the assets of their company to Johnson & Johnson in an effort to expedite the development, approval and marketing of the test. As part of the transaction, Mr. Millenson was made chief executive officer of Direct Access Diagnostics, a new division set up to market the test. In early 1995, Mr. Millenson was fired, in part, Johnson & Johnson said, because of adverse publicity resulting from contributions that Mr. Millenson made to a think tank with links to House Speaker Newt Gingrich (R., Ga.). The arbitrator ruled on July 15 that Mr. Millenson was unjustly fired.

Mr. Galbraith said that after the arbitrator issued his decision on Friday, he tried to set up a meeting for today between his client and Johnson & Johnson officials to map out a smooth transfer of assets. But the company replied by telling him it had filed a court challenge to the arbitrator's decision, he said. Mr. Galbraith then wrote Johnson & Johnson, demanding that the company take "extraordinary precautions" to make sure that all the assets are "protected and preserved pending the outcome of further litigation."

Mr. Galbraith said, "This is a corporation that is abusing the legal system, that has spun out of control." Mr. Leebaw, the company spokesman, called Mr. Galbraith's remark "completely inappropriate and unfounded." In its three-page complaint filed in New Jersey, Johnson & Johnson asserted that the arbitrator's decision "constituted an award of punitive, exemplary or special damages," which were specifically excluded from the employment contract.

Analysts say that even if Johnson & Johnson eventually were to lose the HIV test business, it isn't likely to do much damage to the company, which last year rang up $18 billion in sales. Kenneth Abramowitz of Sanford C. Bernstein & Co. said he expects the test kit to generate peak annual revenue of only about $100 million, making it a "single," not a "home run." But some other analysts believe the kit, which was approved by the Food and Drug Administration earlier this year, has much greater potential, especially if marketing is stepped up here and abroad.

In any case, said Mr. Abramowitz, the arbitrator's decision isn't good news for Johnson & Johnson. "It's embarrassing to have a product like this, take it to the FDA and get approval and then have an arbitrator say you have to give it back because you did something wrong," he said.

Mr. Galbraith said that Mr. Millenson doesn't expect a problem raising the money needed to market the test. "There has been tremendous investment interest," he said.

The test works like this: The consumer pricks a finger with a lancet and then puts a few drops of blood on a card that is mailed to a laboratory. The results are available by telephone within several days. People who test positive for HIV, the virus that causes AIDS, receive counseling over the phone and referrals, if needed, to local health professionals.

Johnson & Johnson initially began selling Confide in Texas and Florida, but it recently began marketing the kit nationwide, except in California and New York, through an 800 number. For now, the test is available at retail outlets only in Texas. The FDA recently approved a second home HIV test, by Home Access Health Corp., Hoffman Estates, Ill., and other companies also are working on their own versions.

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