Monday, March 9, 2009

Of Barnum's Prescience, Part Two. . . .

UPDATED -- 03.09.09 @ 10:30 AM EDT

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I think the Centocor/JNJ reversion clause at 8.2(c), will be triggered, if this deal closes on the terms described today:
". . . .(c) Change in Control. If either party is acquired by a third party or otherwise comes under Control (as defined in Section 1.4 above) of a third party, it will promptly notify the other party not subject to such change of control. The party not subject to such change of control will have the right, however not later than thirty (30) days from such notification, to notify in writing the party subject to the change of Control of the termination of the Agreement taking effect immediately. As used herein "Change of Control" shall mean (i) any merger, reorganization, consolidation or combination in which a party to this Agreement is not the surviving corporation; or (ii) any "person" (within the meaning of Section 13(d) and Section 14(d)(2) of the Securities Exchange Act of 1934), excluding a party's Affiliates, is or becomes the beneficial owner, directly or indirectly, of securities of the party representing more than fifty percent (50%) of either (A) the then-outstanding shares of common stock of the party or (B) the combined voting power of the party's then-outstanding voting securities; or (iii) if individuals who as of the Effective Date constitute the Board of Directors of the party (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors of the party; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the party's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or (iv) approval by the shareholders of a party of a complete liquidation or the complete dissolution of such party. . . ."

Note the bolded portions -- only three of Schering-Plough's previously-serving directors will be elected to the renamed-as-Merck surviving board, post transaction.

Note also, that "the Board" referred to in 8.2(c) above must mean only the Shering-Plough board. Not any board led by CEO Clark. No, it means the "old" Schering board -- for a contract cannot bind anyone who is not then a party to it, or does not agree to be bound by it. And Clark's board did not, in 2003. Ponder this, afterall -- is it not CEO Clark offering to exchange "combined company" shares, today, for the "old ones" which represented the stand-alone Schering-Plough businesses? Lawyers can -- and will -- argue about this, despite the contrary assurances of Merck's General Counsel, today, on the call. Plainly, Centocor meant to prevent these rights/arrangements from fallling into "enemy hands". Centocor bargained, and paid for that right. I suspect this is far from clear.

Well, this will be entertaining, if nothing else, as the parties also agreed to binding arbitration of any dispute. [Follow the link to learn more about how that might play out.]

~~~~~~~~~~~~ * ~~~~~~~~~~~~

So, in a reverse-merger (ostensibly to keep the JNJ reversion clause from being triggered -- more on that, below), Messrs. Clark and Hassan have agreed, apparently, that Schering-Plough is worth only about $16.6 billion more than Schering-Plough paid for Organon, outright, in November 2007. Organon cost Schering just under $16 billion. At this morning's open, Schering-Plough is worth $19.80 -- or an approximate $32.67 billion market cap, on 1.65 billion outstanding common shares. NYSE opening tape:

. . . .SGP 9:41AM ET $19.80. . . .

So, is all the rest of old Schering-Plough (excluding Organon), only worth $16.6 billion?

I'd say that this deal is a huge coup for Merck (if it clears Hart-Scott, and EU Merger authorities, relatively intact, and perhaps more importantly, doesn't get delayed, or scuttled, by litigation from Johnson and Johnson). I'd say that, once again, CEO Hassan has managed to cart off something like $70 million, while shafting the common shareholders (especially those that bought at $27.50 $32 [$32 was the Spring of 2007 high-price] in the last public offering -- September of 2007!), and (probably) getting about 40 percent of Schering-Plough's rank-and-file workforce severed. Cut loose. Fired.

"Doin' a heckuva' job, Freddie!"

Now, as I alluded to above, expect a challenge -- in some form -- from JNJ. The Remicade/Golimumab reversion clause (via the Centacor distribution agreement), by rights, ought to have been triggered by this deal. But Schering and Merck have structured it so that Schering-Plough (renamed to Merck) is actually the surviving entity. The CEO will be Clark; the colors will be that odd off blue-green and white, the HQ will be in Whitehouse Station -- but under those surgical drapes, in the OR, Schering-Plough CEO (for the moment!) Hassan will tell JNJ CEO Weldon, "the patient's heart is still beating, maroon and white. . . ."

That is, the JNJ reversion is not triggered, they'll say, because the SGP legal entity survived this full-body transplant. "It is just that the heart, Schering-Plough, the business, stopped beating. A minor technicality. Really. Let the Frankenstein Monster off the table, they'll say.

But William Weldon is smarter than that.

Expect Merck/Schering to pay, and pay a lot, to JNJ for this transaction structure -- and not in a way that increases the deal price received -- by the long-suffering Schering-Plough shareholders.

I'll cover Fred Hassan's personal potential payday -- after I finish vomiting. He is to be made (probably north of $72 million!) -- after I finish vomiting. He is to be made filthy rich again -- see Pharmacia), for running a company into the ground.



Anonymous said...

It's funny how no-one remembers how many NJ people at Pharmacia were not 'brought in' with Pfizer.

With Merck just down the road from Kenilworth---gotta wonder how many will be left on Galloping Hill Rd.

Anonymous said...

Profile of the Sociopath

This website summarizes some of the common features of descriptions of the behavior of sociopaths.

Glibness and Superficial Charm

Manipulative and Conning
They never recognize the rights of others and see their self-serving behaviors as permissible. They appear to be charming, yet are covertly hostile and domineering, seeing their victim as merely an instrument to be used. They may dominate and humiliate their victims.

Grandiose Sense of Self
Feels entitled to certain things as "their right."

Pathological Lying
Has no problem lying coolly and easily and it is almost impossible for them to be truthful on a consistent basis. Can create, and get caught up in, a complex belief about their own powers and abilities. Extremely convincing and even able to pass lie detector tests.

Lack of Remorse, Shame or Guilt
A deep seated rage, which is split off and repressed, is at their core. Does not see others around them as people, but only as targets and opportunities. Instead of friends, they have victims and accomplices who end up as victims. The end always justifies the means and they let nothing stand in their way.

Shallow Emotions
When they show what seems to be warmth, joy, love and compassion it is more feigned than experienced and serves an ulterior motive. Outraged by insignificant matters, yet remaining unmoved and cold by what would upset a normal person. Since they are not genuine, neither are their promises.

Incapacity for Love

Need for Stimulation
Living on the edge. Verbal outbursts and physical punishments are normal. Promiscuity and gambling are common.

Callousness/Lack of Empathy
Unable to empathize with the pain of their victims, having only contempt for others' feelings of distress and readily taking advantage of them.

Poor Behavioral Controls/Impulsive Nature
Rage and abuse, alternating with small expressions of love and approval produce an addictive cycle for abuser and abused, as well as creating hopelessness in the victim. Believe they are all-powerful, all-knowing, entitled to every wish, no sense of personal boundaries, no concern for their impact on others.

Early Behavior Problems/Juvenile Delinquency
Usually has a history of behavioral and academic difficulties, yet "gets by" by conning others. Problems in making and keeping friends; aberrant behaviors such as cruelty to people or animals, stealing, etc.

Not concerned about wrecking others' lives and dreams. Oblivious or indifferent to the devastation they cause. Does not accept blame themselves, but blames others, even for acts they obviously committed.

Promiscuous Sexual Behavior/Infidelity
Promiscuity, child sexual abuse, rape and sexual acting out of all sorts.

Lack of Realistic Life Plan/Parasitic Lifestyle
Tends to move around a lot or makes all encompassing promises for the future, poor work ethic but exploits others effectively.

Criminal or Entrepreneurial Versatility
Changes their image as needed to avoid prosecution. Changes life story readily.


Other Related Qualities:

Contemptuous of those who seek to understand them
Does not perceive that anything is wrong with them
Only rarely in difficulty with the law, but seeks out situations where their tyrannical behavior will be tolerated, condoned, or admired
Conventional appearance
Goal of enslavement of their victim(s)
Exercises despotic control over every aspect of the victim's life
Has an emotional need to justify their crimes and therefore needs their victim's affirmation (respect, gratitude and love)
Ultimate goal is the creation of a willing victim
Incapable of real human attachment to another
Unable to feel remorse or guilt
Extreme narcissism and grandiose
May state readily that their goal is to rule the world

(The above traits are based on the psychopathy checklists of H. Cleckley and R. Hare.)

Condor said...

The bell tolls for thee, Fred?

[Re: Immediately above comment(?)]


Anonymous said...


I do think your side bar title Hassan and Cox, Part Deux? Celebrex (celecoxib) is prescient of the current merger, etc..

I believe in the concept that those who don’t know history are doomed to repeat it. So allow me to remind your readers of Fred’s past history.

Fred took over Pharmacia/UpJohn in 1997. In 2000 Celebrex (celecoxib) was marketed and it was also around this time that the Merck studies showing an increased risk with Vioxx were reviewed by Dave Graham, ( Then in 2001 Fred marketed Bextra (valdecoxib). (Now both of these compounds were obtained by Fred’s merger of Pharmacia / Upjohn with Monsanto owner of Searle in 1999 and it was Searle that developed both Celebrex and Bextra.

By 2003 when Fred sold Pharmacia to Pfizer largely based on the sales of these compounds other studies on the cardiotox of Vioxx and celecoxib were reviewed by Dr. Graham.

Now we have the problems in the news with Zyprexa (olanzapine). For which you have posts on Fred’s me-too version asenapine ( from early Feb.. Now just like with Celebrex and Bextra, Fred obtained asenapine in an acquisition. Most recently Fred filed the complete response for asenapine on Feb 20th, got a big bonus on Feb 27th, as it will now presumably be approved soon, and Fred is again selling a company with impeccable timing and has arranged to walk away with oodles of cash ( before the S--- hits the fan.

And what does Merck get out of this deal?

Well in my opinion, among other things, Merck gets a second Vioxx called Saphris (asenapine).


Anonymous said...

Let's not forget Pharmacia's Zyvox launched in 1999. Maybe someday I'll tell you about the bone toxicities and the relationship to the exact opposite effect with the floroquinolones and antipsychotics like Zyprexa, and how FDA is involved in the rewriting the rules for the generic drug names for these drug classes so it will cover the relationship up for new drugs that come down the pike.


Anonymous said...

"I will be watching from the side-lines (pause) with pride, many of you will continue to build a stronger company, I wish you luck" or some BS like that. Barf!