Sunday, January 31, 2010

Seeking Alpha Points To CEO Clark's Statements -- At JP Morgan Conference


SeekingAlpha points to what he believes is Merck CEO Dick Clark either (i) mentioning a deal not yet done, or (ii) getting confused about a prior license deal, at a JP Morgan conference on January 12, 2010.

I think it is the latter -- as it is fairly common in pharma biz circles, to euphemistically refer to an in-license of technology as an "acquisition" of that technology, as a form of business-speak shorthand. Not perfect, but it conveys the sense of what happened. And I think that's what happened here. In any event, here's a snippet form SeekingAlpha -- do go read it all:

. . . ."And as we announced the Merck (MRK) BioVenture in the last year or so, we continue to do acquisitions with Insmed and relationships with Insmed and Avecia for a biological standpoint to build our infrastructure and manufacturing capabilities. So I think this will be an important part of our strategy. It’s not put on the back burner as some have suggested that would take place."

–- Merck transcript from JPM Healthcare Conference (pdf). . . .

Merck holders and not Insmed holders should be more worried if the CEO is getting confused with the merger deals that took place. 51 deals in one year is a lot but to specifically mention Insmed twice must mean something, right?

I am not so sure. And, as SeekingAlpha quite appropriately discloses, he owns a position in Insmed, so there would be at least some motivation on his part -- to infer more here. Me? I think it all fairly innocuous, myself.

Saturday, January 30, 2010

The Context, And "Back Story" -- Bertolini's New Genzyme Audit Chairmanship


ForExYard.com has a nice run-down of the troubles that have beset Genzyme -- and the pressures that led it to move Bob Bertolini into the role of the of Audit Committee chairman, replacing Douglas A. Berthiaume [a Genzyme director since 1988, and the Chairman, President and Chief Executive Officer of Waters Corporation, a manufacturer of high performance liquid chromatography instrumentation and consumables]. Note that Mr. Berthiaume isn't a licensed CPA -- while Mr. Bertolini apparently still is.

Do go read the whole article, but here is a bit of it:

. . . .In a bid to fend off a proxy assault from dissident shareholders including billionaire investor Carl Icahn, Genzyme is racing to change its corporate governance practices before change is thrust upon it. . . .

Now, under pressure from big shareholders such as Relational Investors' Ralph Whitworth, and with Icahn considering a proxy fight, Genzyme is moving with a heightened sense of urgency to address other investor concerns. . . .

Fosamax Judge to Select Replacement "Bellweather" Case, By Tuesday


In addition, Judge Keenan has ruled (full 25 page opinion -- in PDF file format) that Merck may not escape another of the bellweather trials, without having to put on a defense, thus:

. . . .The Court does not agree with Merck’s position that Plaintiff’s claim fails as a matter of law without evidence that she had exposed necrotic bone in her jaw. The BRONJ position paper was updated over one year ago based on new research in the field to include stage zero BRONJ, which does not require exposed necrotic bone. The AAOMS task force is comprised of highly regarded experts in this field, including Dr. Marx, one of Plaintiff’s experts on general causation. Another expert on general causation in this matter, Dr. Hellstein, testified that he regards the AAOMS as the “leading body” in oral surgery (Sept. 16, 2009 Daubert Hr’g Tr. at 357.); that the task force that drafted its position paper on BRONJ was “a panel of careful and experienced researches in the field” (Id. at 361.); and that he has adopted the staging system set forth in paper. (Id. at 352-53.) Merck seemingly ignores that, for those reasons, this Court already has recognized stage zero BRONJ. See In re Fosamax, 645 F. Supp. 2d 164, 171 (S.D.N.Y. 2009) (recognizing “stage zero” as a sub-class of patients with BRONJ); In re Fosamax, 647 F. Supp. 2d at 276 (finding that plaintiff developed ONJ no later than September 2003 because an expert testified that, in his opinion, plaintiff’s symptoms as of that time could have been stage zero BRONJ).

Merck has not presented the Court any authority or expert that disagrees with the AAOMS’s position that stage zero BRONJ should be considered an ONJ injury. Nor does Merck cite any authority that disputes that bisphosphonates can cause this less advanced form of the injury. Rather, Merck attempts to play on an inconsistency within the definition of BRONJ promulgated by the AAOMS and the experts in this matter. Specifically, Merck argues that BRONJ by definition requires exposed necrotic bone, so stage zero, which is not characterized by exposed necrotic bone, cannot be a recognized form of the condition. The AAOMS definition of BRONJ first set forth in 2006 must be read in light of the 2009 amendments. The Court is mindful of the apparent inconsistency of including stage zero into the spectrum of BRONJ injuries while that spectrum remains defined by exposed necrotic bone.

It is important to note, though, that stage zero BRONJ is not merely a sub-clinical injury of those at risk of later developing BRONJ, but rather includes a class of patients — including Plaintiff — who present real symptoms, including aching jaw pain. Although the definitional inconsistency is troubling, it also seems highly dubious to the Court that the AAOMS would include stage zero within the spectrum of BRONJ injuries if it were something other than a less severe form of the injury. . . .

Here is the earlier item I wrote -- on the random selection of the next Bellweather case -- by the very able Judge Keenan, come Tuesday.

Friday, January 29, 2010

Ex-CFO Bertolini Now Chairs Board Of Directors' Audit Committee, At Genzyme


Appointed in December, 2009 to the board, he has now been selected to lead the board's audit committee -- in a move to improve corporate governance, there -- and is likely thus designated the Audit Committee's "financial expert" on Genzyme's board, under applicable SEC rules.

I would hope -- now out from under the constant vigilance (and myriad pressures?) of Messrs. Hassan and Becherer (at legacy Schering-Plough) -- that he will show true independence at Genzyme. This is from BostonGlobe.com, this morning:

. . . .the Cambridge biotechnology company said that it has taken steps to strengthen the role of its lead independent director and that it has appointed new leadership to head the board's audit committee. . . .

New board director Robert Bertolini, the former executive vice president and chief financial officer at Schering-Plough, was also appointed to chair the Audit Committee, Genzyme said. . . .

The actions, the company said, were designed to strengthen Genzyme's corporate governance. . . .

I can think of quite a few things to say here -- but I'll simply say "We shall see."

Thursday, January 28, 2010

Filed Under "It's Cool To Be The King!": Trivia


I know -- they are busy, busy, busy people -- and their time is more valuable (or at least more expensive!) than the rest of ours is -- but this news noting a recent Kenilworth zoning variance approval is sort of like fingernails on a chalkboard -- as perhaps another 16,000 employees are waved out of the bottom of the very-same parking garage, in their "hoopties" for the last time, later this year. I gather the thinking is that the sound of the helicopters thundering in will sound like. . . um, "victory". . . . From NJ.com:

. . . .The Kenilworth Planning Board approved an application by Merck & Co. to install. . . . a helistop, a site for incoming and outgoing helicopters without a maintenance or storage area, on the garage on the Gallowhills Road campus. The garage sits behind a group of buildings on the campus, which had been the corporate headquarters for Schering Plough before the pharmaceutical companies merged in November 2009. . . .

According to the testimony the helistop would be used only by top level executives and would serve to link the Kenilworth site to Merck locations in Rahway, Whitehouse Station, and Pennsylvania. . . .

Rotateq® Suspected In "Failure To Thrive" Syndrome -- In Three Infant Cases: NEJM


A new report in The New England Journal of Medcine concludes that Merck's Rotateq® -- used to vaccinate against rotavirus -- when administered to immuno-deficient infants, was associated with severe dehydration and diarrhea in the patients. "These infections raise concerns regarding the safety of rotavirus vaccine in severely immuno-compromised patients." Rotateq vaccine is almost universally administered to infants in the United States, at present.

Per The Wall Street Journal, just now:

. . . .A report in this week's New England Journal of Medicine discusses the cases of three infants with severe combined immunodeficiency, or SCID, who developed dehydration and diarrhea after receiving a first or second dose of Rotateq, a vaccine made by Merck & Co. . . .

Wednesday, January 27, 2010

Shameless Breathlessness, Here -- O/T (Mostly)


Yep. I wanted to see what the hub-bub is all about -- per the New York Times BitsBlog:

. . . .The touchscreen keyboard takes up half of the screen when the device is used in landscape mode. . . .

Update | 1:10 p.m. All of us use laptops and smartphones now. The question has arisen lately: is there room for a third category of device in the middle?

The new device will have to be far better than the laptop and smartphone at doing important things: browsing the Web, doing e-mail, enjoying and sharing photographs, watching videos, enjoying your music collection, playing games, reading e-books. Otherwise, “it has no reason for being.”

Apple’s answer: the iPad.

It looks like, well, a big iPhone, pretty much as anticipated. . . .

1:01 p.m. Apple’s chief executive, Steven P. Jobs, has taken the stage. He looks disturbingly thin, much as as he did when he took the same stage in September to introduce new iPods. But there’s a sparkle in his eye and a smile on his face as he gets a big standing ovation.

“We want to kick off 2010 by introducing a truly magical and revolutionary product,” he says. . . .

"Half of the screen?" For a keyboard? Yikes. Ahem. I, for one. . . am. underwhelmed.

Abbott's Niaspan® Sales Jump 15% -- On Study Win Vs. Merck's Zetia®


No surprise here -- per press clippings of Abbott's Q4 2009 results release:

. . . .Sales of [all Abbott] prescription drugs rose 5.2 percent to $4.85 billion. Global Humira® sales rose 23 percent to $1.66 billion, making it by far the company's biggest product. Sales of Niaspan®, a treatment to raise "good" HDL cholesterol, jumped 15 percent to $254 million, helped by a recent study in which the drug it reduced clogging in neck arteries better than Merck & Co.'s Zetia®. . . .

Also mentioned above is Humira® -- Abbott's biggest seller -- remember, it has a partially shared-history with New Merck, too.

Tuesday, January 26, 2010

I Guess 32 Years IS "Long Enough" -- Temodar® Patent Invalid, For "Inequitable Conduct"


The Delaware District Court just held the Temodar® patent unenforceable. New Merck says it will appeal the trial court's decision, and seek a stay -- but Teva is now cleared, pending FDA approval, to start selling a generic version of legacy Schering-Plough's Temodar cancer drug. As I'd repeatedly noted last year, Temodar is a great drug, but it has had 32, now nearly 33, years of US patent monopoly protection. I think that's plainly more than enough, given the patent statute generally only contemplates 17 years of monopoly power for patented drugs.

Per Reuters, reporting:

. . . .Teva's product has tentative marketing approval, but is awaiting final approval from the U.S. Food and Drug Administration. Once regulators clear it, the product is eligible for six months of marketing exclusivity before rival generics can go on the market, Teva said.

"Teva's generic already has tentative approval, so it's certainly possible we will see it approved and launched within the next 48 hours," said Leerink Swann analyst Seamus Fernandez.

"Once you have a district court decision, and you already have tentative approval, that releases the FDA" to take action, Fernandez said.

Teva's less-costly medicine would likely batter sales of the Merck brand and depress Merck's earnings by 4 cents to 5 cents a share this year, and for several years to come, Fernandez said.

Sanford Bernstein analyst Aaron Gal said he expects Teva to launch its product in the second quarter and for it to have no competition from another generic until the third quarter. . . .

From the very able Delaware federal District Court Judge Sue L. Robinson's opinion, just released (Full PDF of the opinion -- 40 pages long):
. . . .The '291 patent, which issued November 9, 1993, claims priority to the filing of the '656 application through a chain of continuation applications as described below.11 The '291 patent expires in February 2014, almost thirty-two years after the first application in this chain was filed. All together, the prosecution of the '291 patent involved eleven patent applications and ten abandonments. . . .

In Symbol Technologies, Inc. v. Lemelson Medical, Education & Research Foundation, 422 F.3d 1378 (Fed. Cir. 2005), the Federal Circuit explained that there are no strict time limitations for determining whether continued refiling of patent applications is a legitimate utilization of statutory provisions or an abuse of those provisions. The matter is to be decided as a matter of equity, subject to the discretion of a district court before which the issue is raised. Id. at 1385. A court must consider "the totality of the circumstances, including the prosecution history of all of a series of related patents and overall delay in issuing claims" in determining whether laches is triggered. . . .

It is the court's conclusion that the "ends" - commercialization of a very successful cancer drug - do not justify the "means" employed by CRCT [Schering-Plough-Merck's licensor] in this case. Taken in the totality, this case involves eleven patent applications, ten abandonments, and no substantive prosecution for a decade. CRCT's primary justification for delay, that neither Examiner Ford nor Examiner Richter would have allowed the applications at issue absent human data, is not objectively reasonable in view of the fact that CRCT never attempted to traverse the rejections (thereby either validating its position or obtaining allowance of its claims). . . .

For the reasons discussed above, the court finds the '291 patent unenforceable due to prosecution laches and/or inequitable conduct. . . .

The trial court did not ultimately rest its conclusion solely on laches -- or failure to prosecute the patent -- it also set out facts to suggest that Schering-Plough, now known as New Merck -- engaged in "inequitable conduct" -- attempting to deceive the US Patent and Trademark Office.

That is a jaw-slackingly rare occurence -- at least in big pharma cases. But, not inconsistent with what we've seen of Schering-Plough, as documented by this blog. This essentially holds that Schering attempted to hide evidence from the PTO. And so, I suspect this ruling will stand -- on appeal.

Teva (as successor to Barr) has said it will be ready to sell in the US by Q2 2010. That's about $360 million a year -- but the global Temodar franchise is about $1 billion a year. There may now be grounds for legal proceedings, in the rest of world, on the Temodar patents -- given today's opinion. "Blood in the water", and all that.

Ouch. Ouch! Ouch.

That "Fast" Freddie Hassan sure sold Dick Clark a sow's ear, no?

New Merck US Sales Reps "Banned" From Some AIDS Clinics


In its continuing battle to publicize the astonishingly high price of Isentress, AIDS Healthcare Foundation has taken the largely-symbolic move of banning all US Merck salespeople from visiting its free-treatment clinics. Thus:

. . . .The action came in response to AHF’s concerns over Merck’s steep and unwarranted pricing for its key AIDS drug Isentress—at nearly $13,000 per patient yearly, believed to be the most expensive first line AIDS therapy on the US market today. Isentress was originally approved in October 2007 by the Food and Drug Administration (FDA) as a salvage therapy for treatment experienced patients who are resistant to other AIDS drugs. When it first came to market, Merck set the average wholesale price (AWP) of Isentress at $12,150 per patient yearly. Merck has since raised the AWP of Isentress to $12,868—5%—since its introduction to market. . . .

Of course, for those who can afford this price, Isentress has become part of a very promising first-line AIDS treatment approach. This is exactly the sort of business ethics question that troubles me in pharma: now that Isentress is FDA approved as a "first line" rather than just a "salvage" therapy (thus greatly increasing volumes of sales), shouldn't New Merck lower selling prices, given that people are literally dying without the drug -- and most patients without Cadillac insurance plans cannot afford the current co-pays? I tend to think so.

[Hat Tip to Ed, at Pharmalot.]

Monday, January 25, 2010

Live-Blog: Johnson and Johnson Year-End 2009 Call


By 8:25 am, EST on January 26, 2010 -- this live-blogging will go. . . um, live -- until then, here's what analysts expect (per tonight's DailyFinance):

▲ Jami Rubin, Goldman, Sachs & Co.: "Was Simponi's launch a disappointment -- in terms of projections?" Answer: Dominic Caruso, CFO -- No, Simponi is growing quite well -- inline with our expectations, we are through the headwinds, and not inhibited by third party payer restrictions (from any generic competition). We feel very good about the uptake of Simponi (here in the US).

▲ Rick Weiss, at Leerink Swann, in Q&A -- Weldon answers that currencies will still be an issue in 2010. That has direct implications for New Merck, given that with Schering-Plough's higher proportion of non-US sales, New Merck will be increasingly impacted by foreign currency exchange rates.

Growth in the non-US sales of Remicade and Simponi was 11 percent in Q4 2009, when adjusted for inventory stocking initiatives -- this is important, as it should be essentially identical to the growth New Merck reports, on these two products.

▲ Looking at the numbers, analysts call for earnings of 97 cents per share on revenues of $15.72 billion, a slight improvement over last year's fourth quarter results of earnings of 94 cents per share, excluding special items, on revenues of $15.18 billion. The company has recently reaffirmed its fiscal 2009 earnings guidance of $4.54 - $4.59 per share, excluding items. Analysts are projecting $4.55 per share. . . .

▲ New Merck had published this, on January 10, 2010: "With respect to the arbitration with Centocor, a wholly-owned subsidiary of Johnson & Johnson, the arbitration panel has recently been selected. Since the selection, the parties have met with the panel and the hearing in this matter has been scheduled for late September 2010. . . ."



See ya' maƱana.

Possible Remicade/Simponi Arbitration Update Tomorrow at 8:30 a.m., Eastern -- Live-Blog


Johnson & Johnson will host a conference call/webcast tomorrow morning, before the market opens, to report on its 2009 year-end results. I'll live-blog the portions of the call that cover arbitration of the Remicade/Simponi non-US distribution rights reversion. You may follow along, right here, at www.investor.jnj.com:

. . . .Johnson & Johnson will host an analyst meeting at 8:30 a.m. (Eastern Time) on Tuesday, January 26, 2010, to discuss fourth-quarter and full-year 2009 financial results. The meeting will be hosted by William C. Weldon, Chairman and Chief Executive Officer; Dominic J. Caruso, Vice President, Finance and Chief Financial Officer; and Louise Mehrotra, Vice President, Investor Relations. . . .

[LATER -- DailyFinance, with "What to Expect":]. . . .Looking at the numbers, analysts call for earnings of 97 cents per share on revenues of $15.72 billion, a slight improvement over last year's fourth quarter results of earnings of 94 cents per share, excluding special items, on revenues of $15.18 billion. The company has recently reaffirmed its fiscal 2009 earnings guidance of $4.54 - $4.59 per share, excluding items. Analysts are projecting $4.55 per share. . . .

As I earlier reported on January 10, 2010 -- I think it fair to infer that New Merck is telling us that there is little remaining chance of a negotiated settlement -- prior to the ultimate arbitrators' ruling, here -- "with respect to the arbitration with Centocor, a wholly-owned subsidiary of Johnson & Johnson, the arbitration panel has recently been selected. Since the selection, the parties have met with the panel and the hearing in this matter has been scheduled for late September 2010. . . ."

Depending on one's perspective, this could well be seen as a negative admission by Merck -- that it sees scant value in any negotiated settlement, and thus must roll the dice with the arbitrators. In any event, I'll see ya' early tomorrow morning, folks.

Sunday, January 24, 2010

Coming Up "Short" -- Who Made the Cut, At New Merck?


I've been meaning to post this for a while, and given the last few on directors scrubbing their CVs -- I thought I'd just throw it up, without additional commentary -- only these three were "Merck-i-fied":


. . . .only three of thirteen made the cut. . . .

Another High-Profile Director's CV, Scrubbed -- Of Schering-Plough Stint


This time it is C. Robert Kidder (pictured, at right) -- former lead director of Morgan Stanley, and of Schering-Plough. I find this revision specifically remarkable, because his long-time lead director seat at Morgan Stanley was a "turnaround" role, and is prominently mentioned in the below article on his leadship of the "New" Chrysler. The Dispatch story below details his continuing "turnaround" role at the American auto maker. [See Patricia Russo version, here.]

And so -- the theory would go -- his putative Schering-Plough "turnaround" role on that pharma's board would deserve an extended, and natural mention (were it more widely actually viewed that way), right?

Right. But the only mention of his pharma experience, in this rather comprehensive run-down of his history, all the way back prior to his days at McKinsey & Co., is a mention of New Merck. Odd. Or perhaps not so. In any event, compare the below to this older one -- back when Schering-Plough still existed, last summer (Schering role prominently mentioned), and Kidder had just recently been selected to lead Chrysler in its hoped-for turnaround. Here is the current snippet from the Columbus Dispatch; but do go read it all:

. . . .He has kept a low profile as Chrysler chairman, while the company's CEO, Fiat's Sergio Marchionne, has become the public face of the new Chrysler. Marchionne is well-known for revitalizing Fiat, and he is recognizable for his almost-eccentric fondness for black crew-neck sweaters.

But who is Robert Kidder? He was born in New York, raised in Toronto, and graduated from the University of Michigan. As a young man, he worked at a Ford assembly plant in Ontario, Canada. In the 1970s, he worked for the consulting firm that helped Ford come up with the succession plan to replace Henry Ford II.

His executive experience, however, is outside the auto industry.

He was chairman and CEO of Duracell International in the 1980s and moved on to the same roles at Columbus-based Borden Inc. in the 1990s. After he left Borden, he remained in central Ohio and helped lead a series of ventures, including an investment firm, 3Stone Advisors, and the now-defunct Skybus Airlines.

In addition, he serves on the boards of Morgan Stanley and Merck & Co. . . .

That's it -- the only hint that he ever was a part of a bust-up styled as a turnaround in pharma. Heh. These folks sure are kind to themselves.

Oh -- and to get out ahead of the curve, here -- before anyone asks after it -- here is c. Robert Kidder's Muckety Map:


An Interesting Sunday Read -- International Business Ethics


Do go read it all -- but the mention of Merck, in a Salon listing of topics on Africa, caught my eye:

. . . .With their studious inoffensiveness, business ethics often fade into the average MBA program. Two second-year students from Penn's Wharton contend that the required first-year ethics unit is the first they dumped when other homework piled up. Harvard, known for teaching only through narrative "cases," weaves ethics into leadership and strategy. Retired investment banker Rick Shreve runs abbreviated ethics modules at Yale and Dartmouth, surveying philosophers from Aristotle to Carol Gilligan. And Northwestern's Kellogg, reports a second-year student, forbids required ethics courses because their inclusion would suggest that MBAs lack ethics to begin with. None of these programs approaches the ethical relationship between business and the global economy at a moment when international business is radically changing its dealings with developing countries.

In the old days, corporations propped up sham governments -- the so-called "banana republics" -- where they found, exploited and exported a surfeit of natural resources. The incoming investors brought management with their money. Most business school case studies that treat the ethics of these forays suggest that self-serving humanitarianism makes everyone better off. A big drug company like Merck, by investing in unprofitable cures for river blindness in Africa, guaranteed itself long-term loyal customers in a marketplace bound for dramatic growth. The ethical lesson in this case and others like it says that vigorous capitalism honors American corporate law in regions where, because of despotism or chaos, one could get away with meaner deeds.

Now, global capitalism and instant information raise new problems of restraint, commitment and unintended effects. Instead of passively receiving jobs and infrastructure from agricultural exploiters, poor and densely populated countries like Indonesia and Thailand must attract foreign capital by proving their own cleverness and efficiency. So they establish research labs, retain bright young professionals and build airports to connect them to the developed world and its ample resources. (As the first world economies have boomed, more investors have felt the need to find more places to grow their money.) But the capital for new projects is startlingly fluid. When countries look promising, investors pour in. When they start to look dicey, investors run away. Although this is the same logic that informs the pricing of U.S. stocks, the trouble for business students arises when investment decisions in developing countries affect millions of people whose poverty worsens dramatically when investors withdraw. Such consequences invite revised ethical thinking -- even if that thinking leads to established conclusions. Economic theory says markets stabilize where "social welfare" is as big as it possibly can get. But a manager investing in unstable markets faces ethical questions that bastardize theories of economics and justice: Should he take any precautions before selling a big block of currency, knowing that a reigning despot will commit crimes when national debt balloons? Should he worry about teaching low-wage laborers to save and invest? On ethical questions like these, business school profs don't have much more material to draw on than their students do. . . .

Of course, the size of Merck's donation to the goal of ending river blindness is approaching $4 billion. Well worth pondering, indeed.

Saturday, January 23, 2010

Ray Russo -- Ex-Cardiac Exec At Legacy Schering-Plough -- Lands At Shionogi


UPDATED: 01.23.10 @ 10 PM EST -- A commenter, below informs that Ray Russo is not related to Patricia Russo. The anonymous comment also offers these observations -- for which we are grateful: ". . . .No, Ray and Pat are not related. Ray is a good guy and wasn't involved with the dynamics of the legacy SP senior management. Overall, a good family man and hard worker.

January 23, 2010 @ 5:50 PM
. . . ."

Sincere thanks go to my well-informed, and diligently thoughtful commenters -- Namaste!

~~~~~~~~~~
END OF UPDATE
~~~~~~~~~~


A smallish item -- as he was never a "top five" officer -- but another casualty of the Vytorin meltdown and bust-up, styled as a reverse-merger finds new employment at Shionogi Pharma, leading that company's Primary Care business, and reporting to the CCO:
. . . .Commenting on the announcement, Patrick Fourteau, President and Chief Executive Officer, said, "Ray comes to Shionogi Pharma with over 25 years of experience with Schering-Plough Corporation, where he most recently served as Global Vice President Marketing, Cardiovascular Franchise. He complements our team well with his wealth of leadership and pharmaceutical experience. We look forward to Ray's contributions to our continued success". . . .

Likely sort of a trivial (editors') question: Does anyone "out there" know whether there is a familial relationship between the two legacy-Schering-connected Russos -- Ray, and Patricia (pictured, at right) -- late a Schering-Plough board member, now on the boards of GM, Alcoa and New Merck? Let me know in comments, if you know. I cannot find anything definitive on the web, since Ray wasn't a top Section 16 executive officer, the relationship (if any) would not generally be required to be disclosed; Schering never disclosed any such relationship. So, on balance, I suspect not.

But if you know something -- I'd love to hear about it.


I collect this sort of trivia. It also makes me wonder about this Paul Weiss lawyer's possible connections to these families -- Raphael M. Russo.

Friday, January 22, 2010

Bayer's Cipro® OS Royalties Lawsuit Settled, In Delaware, On Eve Of Trial


In a dispute dating back to the middle of the last decade, an arm of Bayer Health Care had sued legacy Schering-Plough, claiming that Ex-CEO Fred Hassan and crew were stiffing Bayer out of about $200 million in royalties -- on Bayer's blockbuster antibiotic drug Cipro® OS, for which each company possessed some shared rights. [Cipro OS is the oral suspension of the drug, as opposed to the intravenous version, first introduced by Bayer in 1991.]

For over three years, or over twelve quarters, Schering-Plough made full payments, then it suddenly started short-paying by 10 percent, claiming the contract allowed it to do so -- and claiming the earlier, higher payments were all simply accounting errors.

The size of those errors?

About $200 million. Seems implausible to me, on its face -- that a sophisticated global concern would make a three-year string of mistakes -- crossing multiple GAAP audit periods (all reviewed by PWC), also crossing a few annual federal income tax filings -- and of this magnitude? It's a fifth of a billion, friends.

So -- now, on the eve of trial (opening arguments were scheduled for next week) -- New Merck has agreed to a confidential settlement with Bayer. We can be certain that it involves the payment of monies to Bayer -- but we'll likely never know exactly how much.

Given the exerpt (at right) -- of proceedings in Delaware Chancery Court, late in 2008 -- we may surmise that Schering-Plough was not getting the best of the argument. In fact, throughout, the Delaware Chancery Court Judge seemed truly skeptical, quizzical even, about Schering's supposed reading of the contract (Imagine that!). [Take a look; click the image to enlarge it.]

In any event, CEO Clark was smart to settle up, and agree to pay the toll -- putting this one behind him, quietly. Otherwise, the process would have likely become the penalty, as well. That's all I've got -- it is now officially the weekend. [H/T -- for the story idea -- to AmLaw Litigation Daily, January 22, 2010 Online Edition.]

Thursday, January 21, 2010

Both Mike Huckman and Brian Orelli Miffed About Merck's "Mealy-Mouthed" Disclosure Method, Of Late


I've now mentioned this three times, with three differing (buried) disclosures, related to New Merck, and at least a dozen times, back at legacy Schering-Plough. The good news is that both Brian Orelli, at The Motley Fool, and Mike Huckman, at CNBC -- have taken notice.

It is a general rule of good securities law compliance that if one announces good news by a certain channel, related to any arguably material development -- one should announce bad news related to the same matter, in the same manner -- i.e., same channel. Legacy Schering-Plough, under Ex-CEO Fred Hassan and Ex-GC Tom Sabatino, was particularly notorious for burying important, arguably material, information on the back-water pages of its Investor FAQs Archives, or "Frequently Asked Questions" PDF files. [At least once, in a stunt that would be laughable, if it weren't so sad, they would even delete, or "disappear" the link -- in the site-index -- to those pages. See graphic at right -- click to enlarge, and click immediately previous link for the back-story.]

New Merck seems to be, at least of late, following this same jerky approach. As Mr. Orelli keenly observed this afternoon:

. . . .Merck made the announcement in the FAQ section of its investors webpage, which seems like an odd place to announce such a critical piece of information. Wonder how the topic became a "frequently asked question" if no one knew the data from the trials was complete? You might think the cost of issuing a press release had gone up substantially, but considering the endless number of press releases that some baby biotechs issue, I doubt that's the reason. . . .

Mr. Huckman then chimed in with this entirely apt zinger -- in full-blown snark mode:
. . . .It was simply slipped on the IR page under "Merck FAQ’s" for someone to somehow uncover. Underneath that is yesterday’s date and this: "Keyword: Vicriviroc." Uh, like that’s really a clue that news is buried here. Vicriviroc, by the way, is the mouthful-of-a-name for the drug.

Let the sun shine in. . . .

Indeed -- and if that sunshine doesn't promptly reappear, let the the SEC's Corp Fin staffers (short for Corporate Finance) write New Merck a long comment letter -- on disclosure practice -- as it used to do, with legacy Schering-Plough, when Hassan/Sabatino were repeatedly-recalcitrant about forthwithly, and prominently, disclosing both the bad and the good news.




Object Lesson: some "back-alley" legal tricks are just a little too cute -- by half -- as CEO Clark may very well soon discover.

Mildly-Good News: Merck's Newly-In-Licensed Anti-C. Difficile Drug


This is a nice study result, today, in The New England Journal of Medicine, for a drug candidate now under Merck's wing. If approved, it will be used to treat Clostridium Difficile, especially the increasingly antibiotic resistant strains, that are a problem in may U.S. hospitals.

However, it is not likely to be a very high-margin product for New Merck, when it does reach the market. Why?

Well, Merck came to the game late, here -- and did not develop the drug candidate in-house. No, just last April, it in-licensed the rights to the drug from Medarex, now a unit of Bristol-Myers Squibb. Medarex, in turn, co-developed the drug with the biologics arm of the University of Massachusetts Medical School. In fact, each of these players most-likely have signed lucrative license deals, to get handsomely paid should the drug reach the U.S. marketplace.

So, each of these players will likely receive fairly substantial running royalties, under the attendant development and licensing agreements. Moreover, because Merck did not shoulder much (or any) of the early costs (of the basic research and development effort), entering the picture only once Phase III trials were already well-underway, the royalties New Merck will owe, on each dose, will likely be much higher than if it had done some or all of the early work, or developed the drug in-house, itself. A lower risk approach, true -- but much lower returns, too. Per Bloomberg, reporting this morning:

. . . ."The trial results are impressive," said Lorraine Kyne, a doctor at the Mater Misericordiae Hospital in Dublin, Ireland, in an editorial accompanying the study yesterday. The findings "offer hope in the battle against this increasingly prevalent and difficult-to-manage disease," she wrote.

Merck’s drug consists of two so-called fully human monoclonal antibodies, which are human infection-fighting proteins grown in cells isolated from genetically altered mice and given to patients in an injection. The medicine is designed to neutralize toxins released by C. difficile that damage the intestines. . . .

Good news -- just no game changer for New Merck, here.

Merck's Alan Sachs Grants Very Candid RNAi Prospects Interview


This is simply a great interview/article, by Xconomy's Luke Timmerman -- do go read it all -- five pages of what Merck's leader in this area sees in RNAi's future, tempered by the reality of an industry veteran's battle scars. An interview like this -- tempering near term prospects, by an officer of a subsidiary of the New Merck, to boot -- with Corporate Communications people sitting in -- might suggest that Whitehouse Station feels Merck's current NYSE stock price-action is getting a little ahead of its near term prospects. Thus, a snippet -- do go read it all, though:

. . . .Question: So I guess that means there’s a lot of hype here, right?

Alan Sachs (Merck): There’s a lot of hype, and there’s a lot of ideas. But it’s not a straightforward problem. Injecting something in the bloodstream, leading to something appearing in the cytoplasm in the RNA-silencing complex, there are a lot of black boxes between those two steps. People who are entering the field start with a white paper. It’s much like people who started on targeted therapeutics years ago started with a white paper. If it were so easy, one would have to describe why so few examples exist. The same is true in the RNAi delivery process. You can write down the steps. You can write down what you think will happen. But then you have to put it in a 50-nanometer particle that’s safe and potent to deliver. . . .

Question: Do you worry about things getting a little too frothy RNAi? Because history with other new therapies, like monoclonal antibodies, there was tons of hype in the 1980s, followed by a long bust in the 1990s, before a few products got across the finish line.

Alan Sachs (Merck): My background in molecular profiling was around when the Human Genome Project sequence came out in 2000 and 2001, and living through that bubble. What you realize is that the essence of the excitement is correct, and the reduction to practice may make it less-than-anticipated, but it’s still real. The same thing will be true of the RNA therapeutics space. There is a lot of expectation and anticipation. The reality will be somewhere between that, and zero. We’d like to think because of the experience we have in our company that we have a clear line of sight on what’s practical within a certain time frame.

This will settle down. The acquisition of Sirna by Merck really set this thing off. We’re three years past that. I think in two more years, you’ll see this settle down, much like in the genomics space. In genomics, many of the opportunities consolidated into a few big players. The same thing will happen here. But the big companies like Merck, Roche, Novartis and Pfizer, that have committed to do this, ultimately will be there. Because of the long-term potential of the modality, not the immediate potential, but the long-term potential. It’s huge. . . .

To my eye, this does seem a rather-official soft-pedaling of the recent run-up in Merck's stock price. And that, my friends, would be smart investor relations.

Wednesday, January 20, 2010

Legacy Schering-Plough HIV Candidate, Vicriviroc, Fails Trial; Pulled From Merck's FDA Squadron


Pfizer already has an FDA-approved drug on the market, using this same mechanism -- so it was never going to be a blockbuster. Still, it is a[nother] disappointment -- in a long line of boxcars, a freight train of them, actually -- courtesy of Schering-Plough. Studies will continue on Vicriviroc, or SCH 417690 as it was known in treatment-naive HIV patients, but no more chasing the already in-treatment crowd.

And once again -- adopting a legacy Schering-Plough poor-disclosure practice -- Merck made the announcement via Investor FAQs, not via a formal press release or SEC-filed Form 8-K (Per Reuters reporting):

. . . .In two Phase III studies in this patient population, vicriviroc did not meet the primary efficacy endpoint," the two-paragraph notice said. It said the failed trials enrolled a high percentage of patients who continued to take three or more other active HIV drugs, along with vicriviroc.

Merck said it will continue mid-stage studies of the drug among patients not previously treated for HIV.

Cowen and Co had expected vicriviroc to achieve annual sales of $75 million in 2012, growing to $150 million in 2015 -- modest sales for the second-biggest U.S. drugmaker.

Pfizer Inc's already approved Selzentry works by the same mechanism as vicriviroc. But its sales have been crimped by the need for patients to take a diagnostic test that assesses whether they have mutated strains of HIV that inhibit effectiveness of the class of drugs. . . .

The worst of this news -- for HIV positive patients -- is one fewer future option.

So What's New? After Scott Brown -- Nude Model -- Now, Senator From MA


The positively-breathless predictions of the death of any US health care reform bill -- based on this one Massachusetts-specific event -- are simply overheated. Just as his Cosmo erh, spread was.

Matt Herper, a few minutes ago, writing for Forbes, offers some sensible thoughts (quoting others) -- do go read it all:

. . . .ObamaCare's fate isn't quite sealed yet. But Richard Evans, 47, a former Roche executive and Sanford C. Bernstein analyst who now runs Sector & Sovereign, a New York health care analysis boutique that tries to wring financial bets out of political headwinds, is bullish on health insurance stocks, like UnitedHealth, Aetna and WellCare. But he's steering clear of drug makers like Pfizer and Merck. (He recommends sub-sectors, not individual companies). . . .

The insurers are going to be boosted, he predicts, because of a longer flu season and because consumers are rushing to spend on health care in the fear that they might lose their jobs. Meanwhile, investors are underestimating the havoc that patent expirations are going to wreak on drug company margins. . . .

Do go read it all, to find out why. Boy -- these Republicans are a classy lot.

Tuesday, January 19, 2010

New "Aft-Cast" From Decision Resources: More Telaprevir -- For Hep C Non-Responders


It's all kinda' "More Cowbell!", no?

T

his story feels a fair amount like listening to the truly small-market radio station's weather report, when all the DJ does is look out the studio window, and say "it's raining right now -- more of that -- this afternoon". Well, I guess it's good to see that the forecasting department at Decision Resources is catching up with the already unfolded-reality, in next-generation Hep C non-reponder-treatments. Vertex's Telaprevir is way ahead here:

. . . .Decision Resources, one of the world's leading research and advisory firms for pharmaceutical and healthcare issues, finds that U.S. gastroenterologists will treat a larger proportion of treatment nonresponder hepatitis C patients with Vertex/Tibotec/Mitsubishi Tanabe's telaprevir than Merck's boceprevir. U.S. gastroenterologists indicate that they would prescribe telaprevir to 50 percent of their hepatitis C non-responder patients. Telaprevir is forecasted to earn 71 percent patient share in the U.S. hepatitis C non-responder market in 2013.

According to the majority of interviewed clinicians, telaprevir [a Vertex next generation Hep C drug candidate in Phase III] in combination with peg-interferon-alpha-2a/ribavirin will become the treatment of choice for hepatitis C virus genotype 1-infected patients who previously failed the peg-interferon-alpha/ribavirin treatment. . . .

I think I've been pointing to this for over a year and a half -- most recently, last week -- despite some static from a commenter, there.

It also looks like Goldman Sachs, and JP Morgan made pretty good bets, on Vertex, in Q3 2008 -- at $28. Vertex in now trading north of $41.

Patrica Russo "Vanishes" Her Former Schering-Plough Board Membership


Seems she allowed a Forbes reporter, Jenna Goudreau, to think she was a legacy Merck board member -- not a legacy Schering-Plough one. It's understandable, though, given that the whole bend of the article is to paint her as a "repairing and rejuvenating" voice -- on the various boards of directors she frequents. Truly, who would want a 2003-to-2009 Era Schering-Plough Board stint front and center -- in a piece on turnaround board members? Not Ms. Russo -- that much is certain.

It is, however, simply misleading though, to additionally suggest that her GM seat is a "public service" role -- per Forbes -- do go read it all:

. . . .After working around the clock for six years as chief executive of Lucent Technologies and its successor, Alcatel-Lucent, an $8 billion communications technology corporation, Pat Russo stepped down in late 2008. The 10th most powerful woman in the world, as Forbes ranked her in 2007, finally had some free time. But that didn't last long. . . .

Already on the boards of Alcoa and Merck, Russo joined the GM board in July 2009 and on Tuesday the Partnership for a Drug-Free America announced her appointment as the first female Chairman of the Board. . . .

I was asked by [GM Chairman] Ed Whitacre and the U.S. Treasury to be one of the new appointees to the board as it came through bankruptcy. I'm flattered to join. This is a company that is an American icon. Some people say, "Are you crazy?" Frankly, I think of it as public service. . . .

Perhaps it was simply sloppy leg-work by Ms. Goudreau, at Forbes -- but perhaps it was also something more -- from Ms. Russo. [Mr. Whitacre, the current CEO of GM, placed Ms. Russo on the board of GM -- having also seen her named CEO of Lucent Technologies, back in the day -- when he was CEO and chair of AT&T. AT&T spun-off Lucent Technologies, the company that Ms. Russo used to lead (until early-2008).

Now, directors of GM (like Ms. Russo) are entitled to receive an annual Board retainer of $200,000. The GM Board voluntarily agreed to reduce its total compensation for 2009, including annual Board retainer, retainers for Committee Chairs and Audit Committee membership, and fees for excess meetings and special services, to one dollar effective January 1, 2009. There is no promise that it will do so again in 2010 -- given that GM has now exited bankruptcy court protection, so for Ms. Russo to call her GM board stint "public service", and/or for Forbes' Ms. Goudreau to let that one pass unchallenged -- is telling.]

Gee -- I feel another Muckety map is in order, no? See below:


Monday, January 18, 2010

"Price Waterhouse Predicts" -- On Health Care 2010


This is from the American Medical Association's online magazine amednews.com (do go read it all) -- PWC has focused on the notion that pharma companies will have to become "full partners" in the delivery of US healthcare, post the reform package -- in order to stay competitive. To that end, PWC's experts highlight a 2009 deal between CIGNA and Merck, thus:

. . . .Also among the predictions: Big pharmaceutical companies will grow to become full partners in health care delivery teams. Because heavily marketed drugs aren't the cash cow they once were for the big pharmaceutical companies, many were forced to diversify through mergers and acquisitions, a prediction PricewaterhouseCoopers made last year that came to fruition. These mergers have led to the companies taking on a larger interest in care outcomes.

One example of this evolving role is a recently announced partnership between health insurer Cigna and the pharmaceutical company Merck. When diabetic patients taking two of Merck's top anti-diabetic drugs improve A1C levels, they earn a rebate from Cigna for their medications for the next year. . . .

Interesting. Not enough, by itself -- but an interesting, and encouraging, trend.

A New Decade -- A Newer Masthead. . . .



The above is a replacement for the below, prior mastheads:















Doing a little site maintenence on King Day 2010. That is all. Carry on.