Monday, December 29, 2008

Relator in Organon Raplon Qui Tam Fraud Matter Fires Back


Over the Christmas holidays, lawyers for Dr. Feldstein -- the whistle-blower in the Organon Raplon Qui Tam/False Claims Act suit -- answered Schering's latest motion seeking dismissal, and sanctions -- that background may be read here. Let's look in, but I think Dr. Feldstein is solidly seated "back in the saddle":

. . . .Defendants have apparently latched onto Dr. Feldstein’s statement in his 2003 Certification that he discussed Raplon issues with a “former employee” following his termination as proof that he did not possess information about Raplon until after his separation from Organon. Defendants evidently misread the 2003 Certification, believing the “former employee” to be Sack, the doctor from whom Dr. Feldstein acquired the key e-mail. However, Plona was the “former employee” referenced in the 2003 Certification and Dr. Feldstein was already in possession of the e-mail when his conversations with Plona occurred.

Defendants’ new position that Feldstein had no knowledge of the Raplon fraud during his employment is grossly misleading. Organon’s counsel argued before the Superior Court of New Jersey that the CEPA claim and qui tam action both "stem from allegations that Plaintiff learned of alleged improper and fraudulent activities by Defendants concerning both Arixtra and Raplon during his employment. . . ." Organon’s counsel in the CEPA case made an explicit point of highlighting to the state Court that such was the case because it sought to show that the qui tam and CEPA suits were related to one another. Id. Even the relevant portion of the CEPA complaint filed by Dr. Feldstein confirms he possessed this knowledge prior to his wrongful termination. . . .

I had earlier worried that Lowenstein Sandler -- the lawyers for Schering, in this matter, had put a roadblock in front of Dr. Feldstein's chances to reach a judge, and jury -- in a trial on the merits here. I no longer am concerned about that possibility.

I think Dr. Feldstein's lawyers have made a very-careful, compelling explanation of the Feldstein sworn statements, earlier alleged to be inconsistent. So, I think this one looks to be headed to a full trial on the merits, unless Schering settles it, of course -- and that won't be very good publicity for Schering's vaunted $15 billion Organon purchase.

Sunday, December 28, 2008

GoozNews Points to American Prospect -- on "Rationing" US Health Care


As we end the very-tumultuous, but inspiring, year of 2008, it would serve us well to reflect on where we ought to be going, in 2009, with the Obama-Daschle Administration health care initiatives.

To that end, I read with keen interest a piece Gooznews points to, over at the American Prospect -- exploring the idea of what it really means to be "for universal coverage" in the US -- and, it decidedly does not mean that your insurer is your friend. At least, that is the author's premise.

There are no easy answers here, but I think the point of the post was to provoke people to ask the best, most-illuminating questions -- and the commenters at the Amercian Prospect post have risen to the task. For example, I think one of the most important questions is what are we willing to "trade" -- rationally, openly, trade -- in order to receive truly universal care -- at some level of coverage, for all. To be sure, each of us will find something to disagree with over there. And that is a good thing. But one point seems inescapable: rationing.

Rationing is going to be the reality of 2009, and beyond. So, let's do it in a rational, thoughtful and, to the extent possible, compassionate way. It is the reality. Now, before you come unglued about how unfair that all sounds, do recognize the truth of what one of the most cogent commenters points out -- it is true that we have always endured "rationing" of health-care here in the US. Always.

It has been, in the main, the brutally-blunt outright denial of care -- to 49 million of us -- those without health insurance. And 25 million of those are children. Children. That must change. My belief is that we all must openly, rationally "trade" some part of our luxury-level care -- to get at least basic care, for all.

Here's a snippet, but do go read all the comments:

. . . .The notion that rationing isn't already occurring in the most brutal sense is absurd. There are hundreds of thousands of preventable deaths due to the inaccessibility and unaffordability of healthcare. The Massachusetts plan has moved essential health CARE dollars to useless health insurance policies, providing profits to the commercial insurers at the direct expense of the newly insured who now can afford even less care and services since their money was diverted to insurance. . . .

Posted by Annie at December 26, 2008 03:10 PM

Thursday, December 25, 2008

Sleep More -- And Decrease Your Heart Disease Risk-Profile


As I finished building a drum-kit at 2 AM this Christmas morning (and I am back up, at 7 AM, starting coffee, etc.), I found this New York Times science piece very interesting -- more evidence that a good chunk of heart disease risk may be mitigated by life-style changes -- changes like eating a more healthy diet, like steady, vigorous exercise -- and now, like getting more sleep. . . . Do go read it all, here:

. . . .495 participants filled out sleep questionnaires and kept a log of their hours in bed. At night they also wore motion-sensing devices around their wrists that estimate the number of hours of actual sleep. At the beginning, none of the participants, who were ages 35 to 47, had evidence of coronary artery calcification.

Five years later, 27 percent of those who were sleeping less than five hours a night on average had developed coronary artery calcification for the first time, while only 6 percent of those who were sleeping seven hours or more had developed it. Among those who were sleeping between five and seven hours a night, 11 percent had developed coronary artery calcification, the study found.

After accounting for various other causes, the researchers concluded that one hour more of sleep per night was associated with a 33 percent decrease in the odds of calcification, comparable to the heart benefit gained by lowering one’s systolic blood pressure by 17 millimeters of mercury. . . .

Senior author Diane S. Lauderdale cautioned that the new report does not prove a cause-and-effect relationship between a lack of sleep and heart disease. . . .

That settles it. I am going back to bed -- right now. Christmas can wait "until this platoon is better rested. . . ."

Wednesday, December 24, 2008

Marilyn Mann (Just This Morning, @ Gooznews!) Helps Explain my Earlier Post


Last week, I had mentioned that "someone" would be along to explain, in plain(er) English, what was published December 15, 2008, in the medical journal Circulation, regarding ezetimibe (the main active agent in Schering's Zetia -- and the agent coupled with a statin in Schering's Vytorin).

The results were decidedly not pretty. Take a look at the quoted snippets, below, but do go read Marilyn Mann's whole note, over at Gooznews.

. . . .Atherosclerosis is a chronic inflammatory process, and some of the benefits of statins are thought to be related to their ability to reduce inflammation. A study by James K. Liao and colleagues published online December 15 in Circulation raises questions as to whether ezetimibe lacks these antiinflammatory effects. Statins reduce production of cholesterol in the liver by inhibiting an enzyme called HMG-CoA reductase (see diagram, at upper-right, click it to enlarge -- a cholesterol molecule is depicted in the background of the image), and inhibiting this enzyme also reduces production of rho kinase, a substance that increases vascular inflammation. By contrast, ezetimibe works by reducing cholesterol absorption in the intestines. Although ezetimibe lowers LDL ("bad") cholesterol, it does not reduce production of rho kinase (and in fact may increase it). . . .

The authors conclude that the findings of their study may help explain the disappointing results of the ENHANCE study, in which ezetimibe did not alter the progression of atherosclerosis when added to a statin. . . .


[Emphasis supplied.]

Indeed. Background, here. Now, I'll be off-the-grid for a while -- celebrating a belated Winter Solstice, and such. Namaste,to all of good will.

Tuesday, December 23, 2008

New York Times: "Warfare" for the Health Care of Our Country. . . .


That's just about dead-on, here. Do go read it all, but here is an excerpt:


". . . .This is warfare for the health care of our country,” Mr. Chatman said. “The question is, Will money win, or will the people win? If we lose, we’ll be a second-class country. . . ."

[Ed. Note: From earlier, in the same article:]. . . .“We have to keep the momentum going,” said Ms. Hijane, 34, who was a volunteer in the Obama campaign and is active in women’s health advocacy. “We are not lobbyists. We are simple citizens. We want to make sure that our voices are heard and that health care is reformed.”

One of the people seated around Ms. Hijane’s dining room table, Bruce D. Chatman, worked for I.B.M. for 29 years. Corporations, he said, have too much influence in the legislative process and the health care system. He wants to counterbalance their power with the energy and passion of citizens lobbying for themselves. . . .


[Emphasis supplied.]

You Read This Item, Over a Week Ago, right here. . . .


But whatever.

. . . .Under the settlement, India-based Dr. Reddy's will be able to sell generic versions Clarinex-D 12 Hour, Clarinex-D 24 Hour, and Clarinex Reditabs starting in 2012. [Editor's note: that is the link to MY story.]

The deal settles all pending patent infringement actions filed by Kenilworth, N.J.-based Schering-Plough and Marlborough, Mass.-based Sepracor against Dr. Reddy's in U.S. District Court for the District of New Jersey. Specific terms of the deal have not been disclosed. . . .

Folks -- This One is Bloomberg Reporting -- Not MoveOn.org "Surveying". . . .


And the wind is decidedly freshening -- day-by-day, we each are "putting our hands on the arc of history, and bending once more, toward progress. . . ." -- that's heady stuff, no doubt. Here's the promised Bloomberg snippet -- but do go read it all:

. . . .Obama, endorsed by Kennedy for president, has said he’ll support subsidies, government health programs and new insurance plans to get everyone covered. And Kennedy has an ally in Thomas Daschle, Obama’s pick to direct White House efforts on health-care change. . . .

Public Sentiment

Public sentiment for change is also growing, according to recent polls. Sixty-two percent of registered voters said in an October survey by the Kaiser Family Foundation, a health-policy research group in Menlo Park, California, that the economic crisis has made health-care change more important.

The byword for the Team Kennedy effort is "consensus," according to the aide. Kennedy’s staff has held twice-weekly sessions since October with business, consumer, insurance and hospital groups. The goal is a program that trims costs while extending coverage to 46 million uninsured Americans.

Last week, Democratic and Republican staff members on Kennedy’s Health, Education, Labor and Pensions Committee, as it is known formally, began meeting with colleagues from the Finance Committee to work on proposals, the Kennedy aide said. . . .

The Kennedy staff member said it is clear from the ongoing discussions that new legislation must include steps to keep costs under control.

"For a significant slice of the stakeholder community and many members of Congress, it is really, really important to get a handle on the growing cost of health care," the aide said. . . .

Mr. Hassan -- a clear by-product of universal coverage will be greatly accelerating pressure on name-brand drug prices. Bank on it. And, more importantly, start structring now, to self-manufacture generic versions of your own name brands. Sound crazy? Cut into your own market?

Do. It. Now.

Or someone else assuredly will.

More precisely, someone already is.

You'll note that Merck is preparing to do much the same, in the 2010 to 2012 timeframe. . . .

Friday, December 19, 2008

This is Which Way the Wind is Blowin', Now -- Yes. We. Did.


I found this graphic (I just received) exceedingly encouraging (do see the note at the end, below) -- Now, Mr. Hassan, "the times, they are a changin'. . . .":


". . . .I lost a daughter to cancer in July after a fight she couldn't win because she had no insurance. When President-elect Obama said no one in these United States should die of cancer because they didn't have insurance, I knew we had to work to get him elected. My daughter had to go to a county hospital where they died one by one in Houston, Texas, one of the cities with the best cancer hospitals. That is when I joined MoveOn and worked with them online and in my city to register and get out the message to vote. My daughter passed away wishing her death would not be in vain. Yes We Did. . . ."

— Martha T., Abilene, Texas

Friday Funnies: Schering Goofs Up the Convert Dividend Date; Separately Vertex is Cheered. . . .


Some snowy Friday trivia -- first, Schering whiffs on setting the next Mandatory Convertible Dividend Date (initially having chosen a bank holiday), so no one would be around to wire the dividends out. Sort of a metaphor for Schering's year overall, no? [But at least one way to save on cash-flow!] Take a look:

. . . .Schering-Plough today announced that the quarterly dividend payment of $3.75 per share on the 2007 Mandatory Convertible Preferred Stock will be made on Feb. 17, 2009, to holders of record at the close of business on Feb. 2, 2009. The previously reported payment date of Feb. 16, 2009, was changed to avoid a conflict with the President's Day holiday, which is a banking holiday. . . .

Now, from that -- the ridiculous -- to the sublime:



Mike Huckman, at CNBC, has a story tonight on Vertex's Teleprevir, wondering aloud whether it could sell for $75,000 a year, once approved. Apparently, the consensus is that it is a vast leapfrog over all existing candidates, on efficacy. You'll remember that this next generation Hep C treatment is soundly thrashing Schering's boceprevir week by week, and trial by trial.

What Mr. Huckman doesn't ask (nor did I expect that he would) -- is whether Vertex should charge that much. But I will.

For its part, Vertex "does not comment" on pricing strategies at this stage -- pre-FDA-approval -- but there is no indication from Vertex that it will ultimately hit the US market at such a high-price. Me? I would encourage the Johnson & Johnson-partner to make it as widely available as possible, as quickly as possible, for all those unfortunate souls suffering an incurable disease, after failing treatment on other medicines. It seems as many as half of them might be virus free, if they could take Teleprevir -- it is truly shaping up to be a wonder drug.

[Nota Bene: Investopedia points to one other possible competitor, Human Genome Sciences, in Phase III, tonight, here -- but as I understand it, that candidate is not showing the efficacy Teleprevir has, especially in non-naive Hep C patient trials.]

In any event, Boceprevir has not had nearly the impact on Hep C non-responders that Teleprevir is having. Which conclusion -- is the punchline -- for this post.

Thursday, December 18, 2008

Impertinent Question Department: When is "Performance-Based Pay". . . Um, NOT?


Or, "What did the board say about compensation, just a few months ago?"

Regular readers will recall that, in May of 2008, Schering's Board, and Compensation Committee (chaired by Hans Becherer), told us -- in breathy tones, no less -- that the Top Six at Schering would receive "no payments" under the Long Term Performance Incentive Plan, for the five years ended December 31, 2008 -- if Schering's stock price was the same on December 31, 2008 as it was on March 31, 2008. That was a nice piece of public relations, at the time. It suggested that executive compensation at Schering was truly linked to performance. See this, from the most-recent Schering proxy statement (at page 22):

. . . .The outstanding five-year transformational incentive (with a performance period ending in 2008) uses total shareholder return (both actual and relative to the Peer Group) as a performance metric. Stock price declines often adversely impact total shareholder return. As a result, named executives Hassan, Bertolini, Cox, Sabatino and Saunders may lose future compensation with respect to the transformational incentive if the stock price does not increase prior to the completion of the performance period. For example, had the performance period ended March 31, 2008 (rather than December 31, 2008 as provided in the plan), the payout would have been zero for each of them based on performance metrics of actual and relative total shareholder return. . . .

Unless, apparently, your name is "Tom" -- as in Koestler, or Sabatino.

So, it now seems that the reality varies from the PR, in several significant cases -- and especially if your name is "Tom".

What has happened since the proxy was mailed? Well, Chief Science Officer, Dr. Koestler, and General Counsel Tom Sabatino, have each received significant, unscheduled interim payments -- not contemplated by their original employment contract terms -- and, in the case of Mr. Sabatino, in cash, and without regard to Schering's performance. In fact, Mr. Sabatino received $500,000 in cash, just last week. No strings attached.

Schering's stock stands at $16.70 tonight -- it was $14.40 on March 31, 2008. It was $32 in the Summer of 2007. By way of comparison, when the Transformational Plan was adopted, Schering stock was trading around $17.10, in late December 2003, to early Janaury 2004:



I cannot understand, given today's unwelcome news that Vyotrin/Zetia continued to swoon, and swoon badly, in November 2008 -- despite Mr. Hassan's predictions to the contrary on November 24, 2008, how the $500,000 cash payout can be squared with these vaunted proxy-promises.

To be clear, the cash payout is lawful -- it is just a very cynical way to do business. Cash -- without any earnout, is simply not paying for improved shareholder returns. They (shareholders) simply have had none, of late. So, niether should the two Toms -- in my view.

On November 24, CEO Fred Hassan Said Vytorin/Zetia Sales Were "Stabilizing" -- Um. Not. -- Off 10 percent in November!


Here is a link to the Schering R & D Webcast live-blog, at which Fred Hassan said he saw sales of Vytorin/Zetia "stabilizing", and that the company was putting that problem behind it.

Actually, though, it turns out that sales were contracting, and at an accelerating pace, in November 2008 -- in a now quickly-shrinking overall US market-place for cholesterol management drugs.

Yep. Here is today's SEC-filed Form 8-K -- detailing actual IMS scrip data for November 2008: Down another 10 percent!

Gee -- "Yer' doin' a heckuva' Job, there, Freddie!" -- to modify a quote of our outgoing Commander in Chief. . . .

And, a snippet from the Reuters wires:

. . . .Schering-Plough says in a Securities and Exchange Commission filing that sales of Zetia were down almost 9 percent from October to November. Sales of Vytorin, which combines Zetia and Merck's older, now-generic cholesterol drug Zocor, are down 10 percent. . . .

Prescriptions of Vytorin and Zetia fell from 2.19 million to 1.98 million in November, the first time monthly prescriptions of the cholesterol franchise have fallen below 2 million this year, Schering-Plough said in a filing with the Securities and Exchange Commision.

It cited statistics from IMS Health, a widely used pharmaceutical information firm.

The monthly decline for Zetia and Vytorin was steeper than the 6.3 percent decline for the overall cholesterol market, said Schering-Plough, which co-markets the drugs with Merck.

Merck earlier this month said it expects combined sales of Vytorin and Zetia to fall in 2009, due to flagging U.S. demand for the products. . . .

Said another way, Schering's joint venture continues to lose share, in a shrinking United States market. In October, the Vytorin/Zetia franchise held about 10.6 percent US share -- in a month, that has delcined to 10.27 percent. Ominous -- a four-point drop -- in a month. So, almost a year after the world first began to learn that "something was amiss" with ENHANCE -- US market share is still declining -- and that decline looks to be acclerating, once again.

Wednesday, December 17, 2008

Four Three Defendants Settle with Schering -- on Generic Versions of Clarinex® RediTabs -- But That's Not "Good News"


Of the fifteen separate generic pharma manufacturing enterprises sued by Schering in 2007 (in an effort by Schering to extend the life of the Clarinex® patents, and prevent generic entries to the United States markets), four -- Perrigo, Dr. Reddy Labs, Ranaxby and now Lupin, have settled, agreeing not to launch a generic before mid-2012. But that still leaves Orchid (an Indian company), and ten others, including Sandoz, in a position to begin an "at risk" launch of Descloratadine [or, Clarinex®-equivalent] product, at any time in early 2009. . . .

You'll likely recall that back in late-July, Sandoz answered Schering-Plough's patent lawsuit titled In Re Descloratadine Patent Litigation (MDL No. 1851 Civil Action No. 07-3930), by asserting, in a motion for declaratory judgment, that both of the principal patents Schering relies upon in manufacturing and marketing the Clarinex® products (the so-called '463 patent, and the '274 patent) are invalid -- and thus unenforceable, at least as to Sandoz -- chiefly for procedural defects in the way Schering handled its FDA Orange Book notices, and then subsequently failed to include some of the materials listed in the Orange Book submissions -- in its infringement complaint against Sandoz.

The Sandoz answer also asserts that the so-called '274 patent held by Schering is generally invalid, and thus presents no barrier to Sandoz's planned generic Descloratadine [or, Clarinex®-equivalent] product.

There has been no ruling on this motion, yet. So, stay tuned.

[But, as I earlier wrote: ". . . .the projected 10 percent revenue growth, on over $800 million in Schering sales, from Clarinex, in 2008 looks to be in fairly serious peril, from where I sit. The central question, then, is whether Orchid (and the others) will be willing to go forward with "at risk" generic launches (and risk owing additional damages, if all the counter-claims are found without merit). If a good portion of $800 million is to be gained, though, I think it likely at least some of them will launch. . . ."]

Importantly, I also do want to highlight the larger procedural "kabuki theatre" in play here, using this Clarinex-patents lawsuit offensive -- as an example. Often, large branded-drug pharma makers will bring these "strike suits" -- toward the end of the life of a given patent, against a vast array of companies, sometimes only suspected of being capable of producing a generic rival to the branded drug -- in large part, simply to delay the start-date for generic entry, by legitimate generic manufacturers.

Here, because some of the parties Schering filed suit against in 2007 (most-notably, Perrigo) did not file papers to rebut the legally-created presumption that Schering's patents are valid, Schering is entitled to a judgment preventing Perrigo from entering the US market before July 1, 2012. That is likely of no consequence to Perrigo, as it may well have had no plans to make a generic Clarinex® Redi-Tab. Perhaps, it couldn't care less.

What it also does, though, is serve as a threat to others, by suggesting that the generic makers might be liable for triple damages, if the infringment of the patents is found to be "willful". In this way, Schering can use the federal courts -- to keep lower-priced, but entirely safe and equivalent, chemical compounds, off the market (for a while).

For its part, Orchid has suggested in earlier court filings that it might go forward, calling Schering's "bluff", by launching a generic descloratadine compound "at risk" -- at risk of high damages. But Orchid would then gain the ever-valuable "first to market" lead, on a widely-prescribed, but now lower-price tablet. Volume, volume, volume.

Sandoz, on the other hand, has chosen a "frontal assault" strategy -- in answer to Schering's suit -- by asserting that the Schering patents are generally invalid, due to procedural defects in Schering's filings. And so, if Orchid launches, or Sandoz were to prevail, in 2009, the American (price-sensitive) consumer of Clarinex® would be the most obvious beneficiary.

Alternatively, this may all be summed up in (albeit somewhat derivatively) the form of a single question: When is it time to say Schering has had a "long-enough" monopoly-run -- in the highly-lucrative United States Clarinex® market? Fifteen years? Twenty? When?

Okay. That's three questions, I guess -- but you get the point.

[Editorial Note: A comment, below, was removed at the the request of its poster.]

Tuesday, December 16, 2008

New Study May Suggest Statins' Mechanisms, and "Other Effects" Preferable to Zetia. . . .


In a forthcoming study, online-published in Circulation December 15, 2008, we learn more about the potential effects of the differing mechanisms of action between statins (with a liver mechanism of action) and Zetia, or ezetimibe (with a gut mechanism of action). What we learn would suggest that one's actual LDL/HDL numbers may matter less than the way in which the cholesterol-lowering agent works -- that is, it may have "other effects" which are, as yet, not well-understood. And those "other effects" may actually be providing the bulk of the benefit historically-associated with those lower cholesterol numbers.

A good friend, and an expert -- will be along shortly, to give you more, but here is a snippet from Circulation:

. . . .By inhibiting 3-hydroxy-3- ethylglutaryl coenzyme A reductase, statins not only reduce cholesterol biosynthesis but also decrease the formation of isoprenoids, which are important for mediating signaling through the Rho-associated coiled-coil containing protein kinase (ROCK) pathway. Increased ROCK activity has been implicated in endothelial dysfunction and vascular inflammation. We hypothesize that ezetimibe [Zetia], which inhibits intestinal cholesterol absorption, may not exert similar cholesterol-independent or pleiotropic effects of statins and, when used with a lower dose of statin, have less effect on ROCK activity than a higher dose of statin. . . .

[The study's] results indicate that high-dose statin monotherapy exerts greater effects on ROCK activity and endothelial function, but not on C-reactive protein, than low-dose statin plus ezetimibe. These findings provide additional evidence of statin benefits beyond cholesterol lowering. . . .

Look for a much better analysis, over at Gooznews, shortly.

Saturday, December 13, 2008

Merry Christmas! -- From Hans Becherer, to ALL Schering Shareholders, Employees (and Ex-Employees)!


A new web-isode from the swell folks at CondorMedia!

It's only one minute, twenty seconds long!

Hans Becherer, pictured at right -- Compensation
Committee Chairman, of the Schering Board -- has
sent one, and all -- stockholders, employees and
yes, even all you newly-minted-ex-employees a
very, very personalized lump of coal, for
the 2008 Holiday Season! Do enjoy, everyone!



Or, the YouTube version -- if your browser doesn't like blip.tv:



[All elements are either fair use, or public domain content. . . . feel free to redistribute!]

Friday, December 12, 2008

Tom Sabatino Waddles to the Front of the "Piggie-Payout Trough", Tonight. . . .


[UPDATED @ Midnight: It seems Ed and I were on the same wave-length, at nearly the same time. . . Do go read his, at Pharmalot.com -- it is quite well-put, and covers some territiory here, that I did not.

To speculate a little more on Ed's reasonable conjecture that Sabatino may have been weighing a competing job offer, elsewhere -- I do wonder, if this is to be explained by some suggestion that Mr. Sabatino had "another offer, waiting" -- whether he is already too-deeply involved (since March 2005) in the core executive team at Schering, to credibly take the posture (before any active, vital board of directors) of a hired-gun -- that is, "pay me what they are offering, or I'll walk". . . .

I guess I think that he should view himself as one of those auto-industry CEOs (and an active board should demand it, of him) -- and agree to work for less, to help clean-up what is plainly his own mess at Schering -- given that he was undeniably at least "asleep at the switch" (in the most-charitable view of the chronology) for the whole period of the ENHANCE delay, and then, later, made the final call on several ill-starred litigation moves -- each of which has backfired (see here, and earlier, see here), on the Schering-Plough stockholders.

Now, as to whether we should take a charitable -- or more jaundiced view of his actions since the beginning of 2007 -- do not forget that he sold nearly $1 million worth of stock back to Schering, off-market, privately, on April 15, 2007 (think individual IRS Form 1040 due date!), at what turned out to be highly-inflated values -- to satisfy his personal tax obligations on huge chunks of compensation he had already received -- in the form of restricted stock.

That is, he effectively stuck Schering with inflated stock prices, on those shares, to cover his taxes, that year, on the lapse of the restrictions -- to do so, he handed Schering's treasury 32,455 shares (then priced at $27.94) -- and kept 37,555 shares, for himself -- or just over a million-dollars worth, at those values.

But that is just the way I see it -- he plainly. . . doesn't.]

~~~~~~~~~~~~~~~~~~~~




Click here to see the video!

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Buried on a Friday night, at the SEC's virtual filing window -- just like Dr. Koestler's before him (by a few months), Schering EVP & GC Tom Sabatino -- while literally tens of thousands of Schering employees have either lost their jobs (due to the market-swoon occasioned by the ENHANCE-Vytorin/Zetia debacle), or been reassigned (due to the acquisition of Organon, late last year) -- has just waddled up to the corporate-piggie-payout trough for a special $500,000 cash bonus -- and a 7.5 percent increase in salary -- to a whopping $857,100 per year.

In addition, select Schering executives (all of Schering's Top Six) have just had their employment agreements amended -- specifically, their severance payments, so as to increase the tax advantages to them -- if any of them happen to be severed after the scheduled roll-back of Bush's much-earlier (2003) tax cuts on the richest one percent of American individuals. Oink. Oink.

So far this year, Schering's common stock has fallen over 46 percent, on the NYSE. The flagship franchise has shed about 30 percent of its profitability, thus far -- and, as a result, Mr. Sabatino is now embroiled (and in some cases, personally named) in over 180 lawsuits -- many of which, at least arguably, it is alleged, would have never been filed in the first instance, had he not been asleep at the switch -- and demanded real action as ENHANCE was repeatedly delayed.

That is, had ENHANCE results been promptly-, and fully-disclosed -- in early 2007, none of this might have transpired. And so, we now learn that the going-price for such "shenanigans" at Schering? $500 large -- no doubt, in 30 [huge ingots] of silver, I am certain. Wow -- take a look:
. . . .Compensation Adjustments for Thomas J. Sabatino, Jr.

The Compensation Committee also took on December 9, 2009, the following actions with respect to the compensation of Mr. Sabatino:
• Effective December 16, 2008, Mr. Sabatino’s base salary will be increased by 7.4%, from $798,000 to $857,100; and

• On December 9, 2008, Mr. Sabatino was granted a special cash award in the amount of $500,000.

The above actions were taken by the Compensation Committee in recognition of Mr. Sabatino’s sustained strong performance as Executive Vice President–Global Law and Public Affairs & General Counsel and the increased responsibility he assumed for Global Administrative Services in October of 2008. . . .

Gee -- that's reassuring -- recall, here, that Schering said it would survey all shareholders about executive pay -- now after that, it does this?! Wow. Hey, Wellington (Schering's single largest stockholder -- at around 12 percent of all outstandings) -- it is time to sharpen your pen -- pound it into a sword, on Monday morn'!

He ought to be ashamed. How many "regular" Schering employees are now pulling "double-duty" -- for no additional compensation -- just fighting for the priviledge of keeping their paychecks, in the tar-baby he, CEO Hassan, and the Top Six have made of Schering in 2008?

And so, Hans Becherer hands him a Cool Christmas half-million -- in cash -- without any earnouts? Were Sabatino a man of true integrity and honor, under these difficult circumstances for his company (and given that he's already been paid multiple millions in cash) he'd decline it -- but I'd not be surprised to learn that he actually helped to engineer it -- albeit indirectly, sub rosa.

And, what of Mr. Becherer's role in this? This is -- to my eye -- a simple, but plainly-actionable breach of fiduciary duty -- a duty to avoid delivering excessive compensation for entirely piss-poor performance (consider this a representative example) -- it actually smells a little like a buy-off -- just as the bump-lump given to Koesler did, at the time.

I trust the plaintiffs in Cain v. Hassan will amend the class action and derivative complaints, to add this turn of events as another count against Mr. Becherer, and the whole of the Compensation Committee.

Where, oh where -- do they find these numbskulls?

This Old-Generation Hep C FDA Approval. Will. Simply. Not. Be. Enough.


This last generation FDA Hep C approval will not. be. enough. to make any difference -- overall, for Schering.

Just as the Foradil market is small, so too, is this -- and short-lived. In a year or so, Vertex will literally obsolete this whole pegalated line of therapy, altogether. Vertex's Teleprevir will crush Schering's Boceprevir.

And no one will accept the current low success rates (especially amount non-naive patients!), and daunting side-effects this current generation of Hep C treatments cause.

Namaste

Friday Class Actions Update: Schering has filed Several Motions to Dismiss. . . .


All of them are rather pedestrian, and make all the typical suggestions. So I'll not bother with them, for now.

By far the most interesting motion Lowenstein Sandler has filed, on behalf of Schering, appears in the putative ENHANCE securitites class action, originally called Manson v. Schering, et al. (Case No. 08-397) -- it suggests, improbably, that all the allegations about early scienter (and thus, early, and unlawful, common stock sales by Carrie Cox, and others, presumably including GC Tom Sabatino) ought to be stricken -- because the allegations in those counts of the amended complaint rely, at least in part (but importantly, only in part), on anonymous postings at CaféPharma for support. Let me quote a little of this line of argument from the motion, to give you a flavor:

. . . .CaféPharma is designed for use by sales representatives at competing drug companies. Messages left there are anonymous and, according to CaféPharma itself, their authors can never be traced. With that license of complete anonymity, CaféPharma is a haven for racism, misogyny, wild speculation, and misinformation. Crude comments about the physical appearance of female executives and sales representatives, as well as the sexual prowess of their male counterparts, flood the site. Minorities are denigrated and pilloried. Individuals pose as “insiders” at competing drug companies for the purpose of smearing their products, in the apparent hope of securing a competitive edge in the marketplace.

Rumormongering abounds on the board; indeed, if the messages were to be believed, then Schering should have long ago disappeared through a corporate merger or acquisition.

CaféPharma is, literally, the cyberspace equivalent of scrawls left on a men’s room wall. And it is from this source that plaintiffs draw allegations of so called “facts” to suggest the scienter and knowledge required to support their claims of securities fraud in this case. . . .

Odd -- this motion to strike seems to assume that the sole support for the insider trading allegations is the CaféPharma postings. That is simply not the case. There are also, as we much-earlier noted, here, "confidential" witnesses to these matters. My prediction? This will not fool Judge Cavanaugh.

Moreover, this line of argument smacks of "soft elitism" -- to suggest that statements ought to be stricken simply because they are often surrounded by offensive, or profane writings or speech -- is not logical. I suppose Lowenstein Sandler -- and CEO Hassan -- would also suggest that each has never heard a true word uttered on a ship-yard loading dock, construction site or in the dark under-belly of a coal mine. Actually, it is a fair bet Hassan hasn't spent any real, meaningful time in any of these places. Perhaps the same is true of these white-shoe lawyers at Lowenstein. I dunno.

In any event, this is exactly the role, at trial, a jury ought to play -- to decide how much credibilty any given statement ought to be accorded -- so, this is simply a rather-sophisticated attempt to keep some pretty damaging, but apparently accurate, evidence from ever reaching the jury. It ought to be resisted. [If Lowenstein were going to prove its proposition, it ought to have submitted proof that almost all of what appears on CaféPharma is false. And that, they know, 'tis too tall an order. Most of it is generally true -- but entirely unauthorized.]

Back to the chase, then -- note that these CaféPharma statements in question turned out to be particularly "reliable" -- in the parlance of the federal Rules of Evidence -- in that each was posted many months before Schering ever admitted there was a problem with ENHANCE -- and at least some of them accurately described the nature of the problem.

If a public, anonymous, but virtual "men's room wall scrawl" contains supposedly treasured, "secret, non-public, inside information" that turns-out to be exceedingly-accurate, months in advance -- is it such a stretch to infer that the actual Schering insiders who avoided massive losses by trading well in advance of the "official-Schering" disclosure (but after the CaféPharma postings) of those "secrets" -- might also have had access to the information, and more importantly, used it?

Evidence often appears in the most unlikely of places.

In fact, just ask Rod Blagojevich about that proposition -- I bet he agrees with it, now. Heh. Much more to come on this -- I need to attend to other matters now.

Thursday, December 11, 2008

FDA to Vote "Up, or Down" on Foradil, and other LABAs -- Tomorrow.


UPDATED From Reuters -- 12.11.08 @ 3:30 PM EST: ". . . .ROCKVILLE, Md., Dec 11 (Reuters) - Two asthma drugs, GlaxoSmithKline PLC's Serevent and [US Schering's] Foradil, pose serious risks that outweigh their benefits for treating adults, adolescents and children, a U.S. advisory panel ruled on Thursday. . . ."

This means that the FDA panel has recommended that Foradil not be prescribed for asthma, at all (regardless of patient age) -- and that Foradil only retain its FDA-approval for treating COPD -- a much narrower market, in the US. In any event, additional warnings, beyond the existing "black-box" language will now go on Foradil's pacakging.

Ouch.

[Item Originally Posted 12.10.08 5:03 PM EST] Reuters has today's FDA review panel summary-story -- as to US Schering's Foradil -- and the staffers' remarks from Rockville, Maryland, at the Hilton:

. . . .Reviewers in the FDA's drug safety office have recommended revoking the medicines' approval for treating asthma in children, according to documents prepared for the panel.

The reviewers also said Serevent and Foradil, which are used much less often, should not be taken by anyone with asthma.

The FDA is undecided on how to proceed and is seeking input from the panel of outside experts. . . .

Vote results to be provided, here, tomorrow. Should be interesting. As I've earlier guessed, I think Foradil will earn an FDA "split decision" -- it will likely remain on the market, but no-longer be indicated for pediatric use. UPDATE: To be clear, no one is suggesting that it be pulled for COPD. I think FDA is clear that LABAs do offer some positive risk-to-efficacy ratio, as to COPD.

Ed Silverman -- With a GREAT Find on Vytorin! -- No. 6 on List of 2008 PR Blunders!


Do go read all of Ed's fine work, here -- but this is a snippet:

Imagine the distinction of making a list of the clueless that includes tin-ear auto execs taking corporate jets to testify before Congress and bailout recipient AIG spending nearly half a million dollars to entertain at a swanky retreat. Well, that’s exactly where Merck and Schering-Plough execs find themselves in the annual ranking of Top 10 PR Blunders by Fineman Public Relations. . . .
". . . .Watch the drugs pull $5.2 billion in revenue in 2007 alone. Side effects, though, may include widespread consumer backlash, around 140 civil class-action lawsuits, and the unwelcome attentions of Congress, the US Department of Justice and a coalition of 35 state attorneys general…Merck and Schering-Plough allegedly didn’t release the results due to internal scientific concerns (reportedly because) there were reasons to doubt the study. . . ."

Under pressure, Merck and Schering-Plough pulled their quirky ‘Food and Family’ ads. . . .

Tuesday, December 9, 2008

So, Merck Will Pair A Generic-Lipitor, With Zetia?


I am still scratching my head, here? Why? Why do that?

Forget, for just a moment, that Merck is going to spend $1.5 billion over the next four years, to build a business model (selling generic versions of biotech name-brands), where there is, as of this instant, no regulatory path (from FDA) -- as to how to approve such creatures. Why does it want a patent fight with Pfizer's Lipitor?

Perhaps Merck doesn't, actually. [Be sure of this, though: Pfizer will protect, litigate and attempt to extend its 800 pound gorilla of a patent on Lipitor -- beyond March of 2010 -- and Schering/Merck won't have launched until -- at best -- 2012.]

Perhaps, however, this is all simply a smoke-screen (think turn of the century opium-dens, here, in Southeast Asia!) -- to put a much-softer focus on the swan song for Vytorin. It may be "real", but only for the moment. Once Vytorin is cut-loose, this too will fade away.

On the bright side (I guess) -- if it is real, this will be a "Full-Employment Act" for New York, New Jersey and DC-area patent lawyers -- in the pharma space. . . . Wow.

Merck Business Review Webcast Now Underway. . . .


CEO Dick Clark is speaking, now. . . but first, my reaction to the almost goofy announcement of a Lipitor/Zetia combo pill?

". . . .If you'd like to take a high-priced "placebo" (Zetia) -- with your generic version of Lipitor (which drug does sport "outcomes" data!) -- by all means, be my guest, here.

Just don't charge me another red-penny for that placebo called Zetia.

I think, more precisely, reimbursement guidelines will shift toward generic statins -- Lipitor-like drugs. Good luck with this -- Merck and Schering-Plough. . .
"




This combo-pill will be available -- at the earliest -- in late 2012 (see above slide -- click it to enlarge). Just about when we will likely find out about IMPROVE-IT. That is what we call a replacement strategy, emerging. Goodbye, Vytorin -- we knew ye' well.

However, by then, several "go-it-alone" generic versions of Lipitor will already be on the market in the United States -- as Lipitor goes off-patent in March 2010 -- so, why would third party payers agree to pay any premium for this combo-pill?

My hunch? They won't.

I do think it rather strange that Merck and Schering will spend perhaps $500 million, or more, over the next four years, on this dubious Phase III project. It is almost comical that Merck believes -- upon the "best-case" 2012 FDA approval -- that this generic-Lipitor/Zetia combo-pill could make a case for premium pricing (and that is the sole motivation, here -- let's be honest!) -- when stand-alone generic versions of Lipitor will have been on the market since early 2010! A full year and a half of lead-time, there, at least. Ouch.

This is, however, for Merck -- certainly the "long-kiss-goodnight" -- (dump of) Vytorin. There is almost no other way to read this Whitehouse Station move.

Yikes! Motley Fool Echoes My Views on Schering's Foradil, at FDA Review Panel, Tomorrow. . . .


I am not entirely certain that I should be linking his, here, as "the Fool" is more-than-occasionally, um. . . just that, as to matters financial, but he does come out where I did, last week (12.05.08), about tomorrow's 8:00 AM EST FDA Review Panel, at the Hilton, in Rockville, Maryland.

Before we read his pull-quote, let me offer an FDA link to all reported Foradil "adverse events", sorted by events involving patients less than 17 years of age -- "The truth will set you free!" -- now, do go read his whole note, but here is his Schering punch-line:

. . . .There's also the possibility of removing Serevent and Foradil from the market altogether. Those two drugs only contain LABAs, while Advair and Symbicort have a steroid added to the mix. Glaxo argues that pulling the LABA-only drugs is unnecessary because they're already co-prescribed with a steroid. . . .

We'll know in about 28 hours.

Monday, December 8, 2008

Forbes Confirms Marilyn Mann's SANDS Analysis. . . .


Matt Herper at Forbes has a new piece -- with all-new pull quotes from various experts -- on the continuing Vytorin/Zetia sales swoon. Importantly, his reporting, and narrative reasoning, follows closely that of Marilyn Mann's, over at Goozenews, which we featured over the weekend past.

Herper uses the metaphor of a hangover, to declare that the Vytorin headache is far from over. Do go read it all -- but here is a salient snippet:

. . . .In the words of J.P. Morgan analyst Chriss Schott, [SANDS is] "finally a positive data point." It will provide some comfort to doctors prescribing the drugs as national guidelines already suggest: as options for people who can't tolerate more well-proven cholesterol-lowering drugs because of side effects. But it is unlikely to head off the next iceberg that Wall Street is worried about: that insurers will make getting the Vytorin combo pill more expensive during the next year. And it emphasizes how Merck and Schering have failed to do the studies needed to defend their $5 billion-a-year (sales) cholesterol franchise.

William James Howard of Washington Hospital Center, the lead investigator of SANDS, firmly believes his results are a strong counterargument to ENHANCE, which he calls "unfortunately not a sound scientific study." He is an expert in cholesterol who does paid speaking for many drug makers. . . .

Critics like the Washington, D.C.-based cardiologist Allen Taylor say the results from that study [SANDS] were no better than one would expect from Zocor alone.

The Vytorin Web site now warns far more prominently than it did a year ago that "Vytorin has not been shown to reduce heart attacks or strokes more than Zocor alone." That gives insurance companies more than enough reason to raise copays for Vytorin, hurting sales even more. . . .

Just as I've been writing since Spring 2008 -- the next wave of declines, as formularies and third-party payers increase co-pays (or, as is the case now in the States of New York, and Illinois, require that an "administrative pre-approval" be obtained by the doctor's offices, for any reimbursement) for Vytorin -- is now beginning. More to follow.

That is, the swoon we witnessed in 2008 will only continue, or accelerate, from here -- in 2009. Mark my words, on this -- these two drugs are still over-50 percent of Schering's consolidated profitability, in play, here.

Sunday, December 7, 2008

Saturday, December 6, 2008

NEJM: Long-Term Pegintron Maintenence Not Effective in Non-Responders for Hep C. . . .



[Note: Click above image, to enlarge.]


As requested by a commenter, on our back-up site, here's the run-down on this breaking current-generation Hepatits C pegalated-interferon study result. Quoth the NEJM synopsis, then:
. . . .We conducted a randomized, controlled trial of peginterferon alfa-2a at a dosage of 90 µg per week for 3.5 years, as compared with no treatment, in 1050 patients with chronic hepatitis C and advanced fibrosis who had not had a response to previous therapy with peginterferon and ribavirin. . . . The primary end point was progression of liver disease, as indicated by death, hepatocellular carcinoma, hepatic decompensation, or, for those with bridging fibrosis at baseline, an increase in the Ishak fibrosis score of 2 or more points. . . .

We randomly assigned the patients to receive peginterferon (517 patients) or no therapy (533 patients) for 3.5 years. . . . there was no significant difference between the groups in the rate of any primary outcome (34.1% in the treatment group and 33.8% in the control group; hazard ratio, 1.01; 95% confidence interval, 0.81 to 1.27; P=0.90). The percentage of patients with at least one serious adverse event was 38.6% in the treatment group and 31.8% in the control group (P=0.07). . . .

Long-term therapy with peginterferon did not reduce the rate of disease progression in patients with chronic hepatitis C and advanced fibrosis, with or without cirrhosis, who had not had a response to initial treatment with peginterferon and ribavirin. . . .

This plainly makes the recent Teleprevir Phase III results (acheiving very solid efficiacy for Vertex, in the same sort of non-responders) all the more impressive. Bet on Vertex to win the next generation battle, here -- over Schering's boceprevir candidate.

Marilyn Mann -- on What SANDS Did Not Tell Us About Vytorin/Zetia. . . .


Over at Gooznews, Marilyn Mann explains very-clearly, and efficiently, what was not found in the post-hoc analysis of SANDS. In this case, The Wall Street Journal largely missed the actual story.

As ever, do go read it all, but here is a particularly tasty-snippet:

. . . .The [not-so] new study is a post-hoc analysis, a term which refers to testing data for patterns that you had not planned to look for when the study was designed. Sometimes called "data dredging," this technique has been compared to shooting an arrow into a target and then drawing a bull's-eye around it.

In this case, the researchers compared patients who achieved low cholesterol levels with a combination of a statin and ezetimibe with patients who achieved similar levels with a statin alone, and found no difference in the effect on atherosclerosis. However, only 69 patients received ezetimibe and the two groups were not determined through randomization. . . .

. . . .Although SANDS was funded by the National Institutes of Health, several of the researchers have close ties to Merck and Schering-Plough. . . .

Gee -- I am shocked -- simply shocked, to learn that the researchers have significant ties to Schering and/or Merck. This is an excellent, sober look at last week's hype on SANDS -- out of Kenilworth. As ever, spot-on, and well done, Marilyn!

Friday, December 5, 2008

FDA: Schering's Long-Acting Beta-Agonist, Foradil, to be "Pulled" from Pediatric Shelves?


The Wall Street Journal is suggesting that FDA has grown more concerned about the class of long acting asthma drugs -- especially when used by children. This class of drugs -- now under very-close FDA review (see the prodigious 460-page, 6.35 MB FDA Briefing PDF File on this matter) -- is called "long-acting beta-agonists", or LABAs. FDA has seen significant post-market-approval evidence that LABAs may actually increase a patient's risk of asthma-related death -- especially African-American children. Apparently the already-existing "black box" warnings on the products may not be enough. Nor, it seems, should they be. My bet is that these will no longer be approved for use in children under the age of 12.

Here's a snippet from the Journal's story -- but do go read it all:

. . . .The analysis was prepared for an [FDA] advisory committee meeting next week to discuss the safety of the drugs as a class. The panel will be asked to vote on whether the drugs should continue to be marketed for children and adults.

The FDA's new analysis of data submitted by manufacturers said there was a higher risk of asthma-related side effects among children ages 4 to 11 and among African-Americans. . . .

Overall, the agency said its analysis showed "that LABAs were associated with an increased risk of asthma-related events relative to non-LABA treatment as measured by the asthma composite endpoint consisting of asthma-related death, asthma-related intubation and asthma-related hospitalizations."

Looking at specific drugs, the FDA said the risk was seen with Foradil, Serevent and Symbicort "but was not apparent in Advair." [Editor's Note: GlaxoSmithKline makes Advair.] The agency also said the increased risk was not apparent when patients were also using inhaled corticosteroids, which current asthma treatment guidelines recommend.

The analysis involved 110 trials and 60,954 patients. The bulk of the patients were from Serevent trials, with about 43,000 patients, the agency said.

The agency said there were 20 asthma-related deaths in the studies and of those, 16 were patients on Serevent and four were patients in the non-LABA group. . . .

More "Off-the-Range" After-Hours NASDAQ block-trades, last night. . . .


Oddly, that sorta'-crazy, "out-of-range" NASDAQ after-hours trading in Schering has started yet-again.

Very strangely, the early (16:04) trade's volume, at almost $0.22 over the NYSE close, was reversed, almost to the share, in volume, in three later trades (toward the end of the active trading, about a half-hour later), but this time, almost $0.22 lower -- at exactly the NYSE closing price; this is from last night's tape:

Time -- Price -- Volume

16:47 -- $15.89 -- 202,687
16:24 -- $15.91 -- 783,413
16:23 -- $15.89 -- 34,254
16:23 -- $15.89 -- 731
16:20 -- $15.89 -- 2,977
16:19 -- $15.89 -- 194

16:17 -- $16.1964 -- 194
16:17 -- $15.91 -- 56,601
16:16 -- $15.87 -- 56,601
16:15 -- $15.89 -- 455,900
16:11 -- $15.89 -- 16,100
16:08 -- $16.2044 -- 603
16:04 -- $16.1219 -- 795,988
16:02 -- $15.85 -- 23,300

The trades I reference are bolded, above. That's a very large number of shares (almost 2.43 million shares!), in only a few very large blocks (most of the volume was comprised of under five huge blocks).

What was going on, here -- last night, and more wildly, two nights ago? Anyone care to make some guesses?

Namaste.

Thursday, December 4, 2008

Merck's 2009-2010 Guidance: [More] Bad News For Kenilworth.


[UPDATE: Merck continues to hedge some of its foreign currency (mostly euro-denominated) exposures -- per CFO Peter Kellog, just now -- thus, it expects, in 2009, a more-dampened currency headwind at the EPS line, vis-a-vis Schering. Merck uses a US Dollar functional currency rate accounting, thus the hedging either helps (or hurts) the EPS line. Merck also hedges based on the contribution to profits, of various exposures. Again, far more sophisticated, and forward-thinking, in its financial management approach, than Schering.

Significantly, Schering does not hedge these exposures -- so perhaps the 2009 EPS headwind from currencies could be a little more than 10 percent, at Schering. Wow. This is a very significant, and largely under-appreciated, source of risk to Schering's operating income for 2009 and beyond.]

~~~~~~ END, UPDATE ~~~~~~


Merck CFO Peter Kellog just said, on the Merck 2009-2010 Guidance Call, that the coveted "Tier II status" [think unrestricted access to remibursement, here] -- which was over 90 percent of all formularies as 2008 began, is expected to fall to 66 percent, during 2009, for Vytorin/Zetia.

Said another way, it used to be that less than 10 percent of all payers in the US required pre-approval for a Vytorin/Zetia new scrip (to be reimbursed) -- now, one in three scrips will require pre-approval.

That proportion is very likely to grow, as President Obama (and a more-active Congress) take a much closer look at reforming reimbursement, and preferring generics -- like generic statins -- for cost v. efficacy equasions. Where is that cardiac event risk data for Vytorin/Zetia? Right. It. Doesn't. Exist.

Remember, folks, that Vytorin/Zetia franchise is still at least 50 percent of ALL of Schering's 2009 EPS (profitability)!

And the Schering cholesterol management offering costs 20 to 100 times what a generic statin costs.

Let's listen in, from the Reuter's story, this morning:
. . . .Merck Chief Financial Officer Peter Kellogg also told analysts on a conference call that he expects combined global sales of its Vytorin and Zetia cholesterol fighters, which it sells in partnership with Schering-Plough (NYSE:SGP - News), to fall next year due to flagging U.S. demand. . . .

Merck said the strengthening dollar would crimp 2009 revenue by 3 percentage points, while having a negative 6 percent impact on earnings per share. . . .

Note that last line, above -- Merck now expects 2009 foreign exchange rates to have a negative EPS effect of 3 to 6 percent on it. Remember, now, Merck sells far less, proportionately, outside the US (only 45 percent of its total is non-US, mostly euro) -- than Schering.

Schering's 2009 sales are expected to be atleast 70 percent outside-US. So expect a new, negative -- closer to 4 to 8 8 to 11 percent EPS downdraft [See my Update, at top, above] -- to Schering's 2009 EPS, due to foreign currencies exposures. That is entirely separate from the overall, continuing swoon in Vytorin/Zetia. Ouch.

Wednesday, December 3, 2008

Full "Early Discovery" to Begin in MDL 1938 -- the ENHANCE-Related Securities Fraud, and RICO Counts, Putative Class Action: Polk


At a judicial status conference, held in open court on November 14, 2008, and now reported into the electronic case records of the PACER system last night, Judge Cavanaugh has apparently ruled in favor of the plaintiffs here, on four of five major points -- and deferred to a later date the fifth point: a statute of limitations tolling issue, not yet fully-in-play. He'll decide that one later, unless subsequent developments moot the issue (make it irrelevant, from a legal point of view).

A new MDL order is proposed to be entered, shortly, reflecting all these developments -- and it would beat back almost all of the dubious suggestions (along the lines I had earlier detailed) offered by Schering's trial counsel. In essence, 20 days from when the order is signed, Schering and Merck will begin turning over each of their file cabinets on ENHANCE matters, company-wide, for discovery. That alone -- so called "early discovery" -- is a huge victory. From an earlier letter on these subjects:



Of nearly equal importance, Judge Cavanaugh has not bought the argument that every plaintiff in every action must be subject to discovery -- this, usually being a clever tactical move, to thwart the otherwise efficient class action pre-trial discovery process, and tip the playing field in favor of corporate defendants. Typically, then, the corporate defendant will run background checks on all the thousands of plaintiffs in each case, and possibly bounce the entire class for any shenanigans a few may have undertaken. But Judge Cavanaugh is having none of that cream-puff canard.

This ruling will allow the plaintiffs to concurrently explore several theories of recovery, without hampering their rights -- as to any other avenues, in the near term. This is the way multi-district litigation coordination was actually originally-envisioned. Meritorious claims will rise naturally, to the top. No more piece-meal discovery; no more inconsistent rulings -- and if a corporate defendant is "truly, completely in the clear" -- it may quickly demonstrate that fact, from its treasure-trove of exonerating documentary evidence. Um. Don't. Hold. Your. Breath. Here.

Do trust me on this -- there'll likely be little-to-none of that, here -- as to Schering, and the individual defendants -- Mr. Hassan, et al. Here is a graphic-image of the salient page -- click to enlarge:



Namaste

Tuesday, December 2, 2008

Schering to Conduct Additional Safety Trials on Sugammadex -- in 2009 -- thus FDA Approval Not Likely Before 2012


[UPDATED -- 12.03.08 @ 9 AM EST: Reuters is now carrying my story -- with nearly the same narrative elements: ". . . .Just last week, Schering-Plough touted the drug as one of five "stars" of its research pipeline at a meeting with investors. . . ." -- Cool!

And earlier, that gentleman at Pharmalot, Ed Silverman, had hat-tipped mine -- for his story on it.]

Man -- this stuff just writes itself. . . .

Well, the mystery of the missing Schering Investor FAQs has been solved, tonight.

A new "Investor FAQs" file, dated today, was just uploaded. It hasn't been filed with the SEC, yet. Look for that, tomorrow.

So, what's the [all-too-predictably-buried] headline, here -- out of Kenilworth, after-hours?

A newly-FDA-requested SAFETY study, for Sugammadex. Yep. Y A W N. Another delay in any future US market approval for Sugammadex -- even though CEO Hassan was touting it, just last week (11.24.08), at the Schering R&D Day web-cast (image of that slide coming here below):



On November 24, 2008, Fred Hassan said Schering was "working through" the issue of getting Sugammadex approved by FDA. This is a very big setback. A multi-year setback, in all likelihood.

Strangely, the November 14, 2008 FAQ-file just re-appeared. Quoting from today's file, now:

. . . .The company has an ongoing dialogue with the FDA regarding sugammadex and recently met with the FDA. In order to address issues which primarily related to hypersensitivity/allergic reactions, the Company plans to conduct an allergy sensitivity trial in healthy volunteers that will include repeat exposure to sugammadex. The study protocol is being developed, and the Company anticipates conducting the trial in 2009. . . .

Repeat exposures to sugammadex -- that, in turn, will require multiple courses of general anesthesia -- that means these volunteers must have multiple surgical procedures, or at least get multiple generals. That alone could take years, to reach a statistically-meaningful number of multiple surgery/multiple general anesthesia patient-volunteers.

So much for Schering's fifth "star", eh?

What was going on, after-hours last night -- on the NASDAQ -- with Schering?


I posted this earlier, on a Yahoo! stock chat board, but now, today's NYSE trading in Schering-Plough would seem to confirm this NASDAQ After-Hours session of last night was an entirely "arranged" spike in prices. Schering is off about 30 cents, again, this morning as I write this.

A caveat: This is simply speculation, based on years of trading, and advising traders, brokers and market-makers, here -- but these "NASDAQ After-Hours" trades look to be "make-whole", or "reversing" trades:

. . . .Time -- Price -- Volume

17:11 -- $16.7604 -- 80,415. . .

16:18 -- $16.81 -- 20,837

16:18 -- $16.81 -- 31,274

16:01 -- $15.901 -- 500. . . .


The large ones are more than $1.30 above the NYSE close, yesterday, and are now over $1.60 above this morning's trading -- more than 10 percent ABOVE prevailing fair market prices.

When aggregated, the "out-of-line" trades amount to a volume of 132,526 Schering shares. Wow.

Did some broker promise to refund a series of blocks, to an institution, if Schering did not rise, from $16.30? Did a large trader allege it was defrauded by someone when it bought in (presumably at, or above, $16)?

Was this a way to settle quietly, reversing the trades -- at inflated prices -- in the NASDAQ after-hours session? It has been quite a while (over a month) since Schering traded at or near $16.80. Were I a motivated SEC compliance sleuth, I'd go take a close look at the NYSE tape, on that day, for blocks that match these, in the aggregate, at around these prices (less one month's worth of interest "carry").

But what do I know?

Cheers!

What Happened to the November "Investor FAQs" on Schering's Website?


I was puzzled to learn, just this morning, that Schering has apparently withdrawn (see -- it's not there!) the November 14, 2008 "Investor FAQs" PDF file that contained the October 2008 Monthly IMS Vytorin/Zetia Scrip data.

Why did Schering-Plough take it down? I dunno. Repeating it here, now:

. . . . . . .Total US Cholesterol Management Market

Oct 2008: 20,292

Sept 2008: 19,666

Total Merck/Schering-Plough Franchise

Oct 2008: 2,186

Sept 2008: 2,171

VYTORIN

Oct. 2008: 1,207

Sept 2008: 1,202

ZETIA

Oct. 2008: 978

Sept. 2008: 969. . . .

Importantly, once filed with the SEC, on a Form 8-K, it cannot simply be "disappeared". So, the original data remains safe at the SEC -- right here.

This creates a rather-odd single event of asymmetry, though -- all the other monthly updates are available on both the Schering website Investor FAQs index page, and at the SEC -- except the one filed Novemeber 14, 2008. What is up with that?

File This One Under "Nero Fiddled -- While Rome Burned. . . ."


The President of IPhRMA, and a highly-placed member of PhRMA, one Schering CEO Fred Hassan, as quoted in Scrip ($; but do go read it all), yesterday:

. . . .Fred Hassan, CEO of Schering-Plough, holds little fear over the potential impact on the pharmaceutical industry of any healthcare reforms that might be sought by a liberal US Senate after president-elect Barack Obama enters office on January 20th, 2009. . . .

Right. Roger that. I would submit for the consideration of our gentle readers, here that Mr. Hassan did say -- in July of 2007 -- ENHANCE would turn out to be a "small, non-important" study -- a study applicable to only a subgroup of specialized high-cholesterol patients. Uh-huh. Okay. Check.

Consider the motivation of the speaker here, that is all I ask. And, by the by, is this the sort of leadership the international pharma trade group was expecting -- when it re-elected Mr. Hassan to a second term as president? I truly wonder. [And what if Mr. Obama receives the nod, for his second term, Mr. Hassan? By then, the recession will be in the world's rear-view mirror, we'll be out of Iraq, and health care will be front and center, yet again -- if it hasn't been, from 2008 to 2012, already.]

Namasté.

Monday, December 1, 2008

Pharma Won't Be Able to Delay Drug-Pricing Reforms Much Longer: Bruce Japsen


This morning, Chicago Tribune health-care business writer Bruce Japsen makes some solid, and objectively verifiable, observations -- about the efforts of pharma, generally, and PhRMA, particularly -- to avoid fairer negotiations on pricing, and to avoid the fairer re-importation of brand name drugs. Do go read it all, but let's listen in, here [emphasis supplied]:

. . . .Some experts believe that imported brand-name drugs could be priced more like generics, which are generally 50 percent to 80 percent cheaper.

Supporters of importation say it makes no sense for U.S. consumers to pay more for the same pills made in countries where U.S. companies have foreign-based manufacturing plants that meet Food and Drug Administration standards. The difference in pricing can reflect lower wages paid in countries such as Ireland and India. . . .

So far, the FDA under Bush has blocked importation, and Congress has not changed the law to allow drugs to be legally moved across U.S. borders, with the effort largely bogged down in the Senate, where Democrats had held a one-vote majority.

Since the Democrats gained more congressional seats in the election, the pharmaceutical industry is preparing for battle.

"Clearly, we are getting prepared for anything and everything next year," said Ken Johnson, senior vice president of [PhRMA] the industry trade group, which has opposed allowing Medicare to negotiate directly with drug firms.

"The government does not negotiate prices, it dictates prices, and that impairs our companies' ability to be innovative with the ability to develop life-saving medicines. In the end, the real losers are patients."

One area where Congress and the Bush administration had been making progress was legislation to allow competition from lower-price versions of biotech drugs. . . .

First, contrary to Ken Johnson's PhRMA spun-sound-bites, the government does not dictate pricing. Mr. Johnson is simply suffering from the dementia induced by 30 years of not having to negotiate with "aggregated" large customers. This is precisely why pharma so fears group purchasing organizations -- pharma will no longer have a commanding negotiating hand -- at least as to price. And that will be good for the insurers, and eventually, all the uninsured patients -- even if universal coverage does not come to pass. Mr. Johnson has gone all "high-dungeon" -- over very little actual substance, here.

Next, Mr. Johnson once again offers the cannard that lower prices will be the death-knell of American pharma's innovation engine. Not one credible shred of evidence exists for this proposition. In fact, many innovative drugs come from Israel, Europe and from India, all places where drug prices (as Mr. Japsen correctly notes) average 50- to 80-percent of US price-levels. Innovation will be fine, Mr. Johnson. Serve us some steak with your sizzle, please.

Now -- my rather-belated Schering-related punchline(s), here: consider what will happen to Schering's margins, as the Obama Administration really gets into high-gear on even relatively modest health-care reforms, like allowing re-importation.

Schering, according to Credit Suisse, receives over 70 percent of all its revenue outside the US (at obviously lower margins than inside it). What happens when effectively 100 percent (or darn near it) of all Schering drugs are priced like Euro-drugs? That's exactly right: collapsing gross margins.

This effect is independent of, and before, the howling currency headwinds. This is also before we consider that US (state-by-state) formularies and Medicare and Medicaid are likely to seek price concessions from the Cholesterol Franchise -- that is, steep discounts, for the simple priviledge of keeping Vytorin and/or Zetia above Tier 4 -- off of the much-dreaded list that requires central office written pre-approval, before sale, for reimbursement.

In 2009, there is a strong probability that Schering's US margins will be slashed -- due to a confluence of most of the above factors. Chief among these will be having to once again compete on the "efficiacy for the price" dimensions -- a playing field on which Schering has long been a no-show -- since at least the waning days of Kogan's reign, in 2002 (think Claritin).