Thursday, July 29, 2010

Good Analysis Of "What To Expect" On Merck's Call Tomorrow

I think this BusinessWeek reporting gets it just right -- finally:

. . . .Merck has insisted its Schering-Plough acquisition was about science, not the chance to slash jobs and other costs to boost net income in the short term. Executives will have to show progress in boosting sales of newer drugs and in advancing experimental drugs -- many initially developed at Schering-Plough. Those revenues are needed offset sales lost as older, blockbuster drugs get generic competition.

Merck also needs to retain rights to blockbuster immune disorder drugs Remicade and its successor, Simponi. Schering-Plough shared revenue from them with Johnson & Johnson, which now is trying to grab all the money under change-of-control provisions in its contract with Schering-Plough. The case is to be heard by an arbitrator in late September, and Merck may discuss its prospects. Barclays Capital analyst Tony Butler says loss of both drugs could cost Merck about $3 billion in sales next year. . . .

Analysts. . . expect earnings per share of 83 cents, excluding one-time items, on revenue of $11.47 billion for the April-June quarter. . . .

Do tune in tomorrow, to see how it all unfolds, but note well that in the Remicade®/Simponi® matter mentioned, the panel of arbitrators could assess monetary damages, in addition to the "lost sales" figures, against New Merck. Thus I place the figure at closer to $4 billion, including such damages, legal fees and costs. [Should J&J prevail, the legal theory would hold that all New Merck sales of these two drugs after November 3, 2009 -- about three quarter of a year's worth of revenue, at this point -- ALSO belongs to J&J. By the time the arbitration ends, that will be almost a full year's sales.]


Anonymous said...

What about all the other late stage compounds that were acquired by Fred in the Organon purchase.

Saphris (asenapine) was predicted to has provided 80% of sales of those late stage compounds. Predicted annual sales of $2 billion, which was revised to $1 billion, and currently likely in the a few hundred million range.


Anonymous said...


condor said...

Actually, Salmon -- Jami Rubin of Goldman Sachs just asked this very question -- "How come no Saphris sales figures?"

Peter Kellog's answer: "mumble mumble mumble. . . we are disappointed with Saphris sales."

Gee - ya' think?

Great call!