Wednesday, June 30, 2010

ENHANCE: Legacy Schering-Plough ERISA Fiduciaries Lose Another Round

I've been busy on other (non-blogging) matters, but this deserves mention -- even late at night. I won't hold it until morning. Just yesterday, on June 29, 2010, Judge Cavanaugh handed the legal team at New Merck yet another defeat -- related to the various would-be federal class actions that arose from the ENHANCE delayed-disclosure debacle. And -- as irony would have it -- the able judge relied on precedents established in the Merck Vioxx securities and ERISA cases.

You'll recall that this same judge ruled against Ex-CEO Fred Hassan and crew, and current CEO Dick Clark and crew twice last week, in an analogous New Merck ERISA setting (called Cobb v. Merck), and in a Schering-Plough securities suit (called Polk v. Schering-Plough). Yesterday, in Gradone, Judge Cavanaugh has now held that the plaintiffs in the legacy Schering-Plough ERISA plans have mustered enough evidence to survive a motion to dismiss.

In ERISA cases, that is a pretty significant event, given that -- in general -- ERISA plan fiduciaries enjoy the benefit of a presumption that they acted appropriately. That is, an "ordinary" stock price decline will be not be actionable -- as a breach of ERISA fiduciary duties. Judge Cavanaugh ruled that these ERISA plan investors have overcome that presumption -- and he's done so by citing as authority Judge Chelser's rulings in the Merck Vioxx ERISA litigation -- from the full 17 page opinion (a PDF file), then:

. . . .Plaintiffs have alleged “dire circumstances” sufficient to overcome the presumption of prudence at this stage. In particular, Plaintiffs have alleged: precipitous decline in the value of Company stock, Defendants’ knowledge of the anticipated harm to the company, as well as the conflicted status of fiduciaries. See Moench, 62 F.3d at 572; In re Merck & Co., Inc. Sec., Derivative & ERISA Litig., 2009 U.S. Dist. LEXIS 22923, at *3 (D.N.J. Mar. 23, 2009) (J. Chesler).

As Judge Chesler explained in a case analogous to the one before this Court,
[t]hough it is clear from this vantage point that Merck survived the withdrawal of Vioxx from the market, the allegations in the Complaint depict a company facing a dire situation. Merck stock plunged by almost 40% following the withdrawal of Vioxx. Billions of dollars in Merck’s market value evaporated. The precipitous decline in the company’s stock price occurred in the midst of controversy regarding the cardiovascular risks of the drug and Merck’s alleged misrepresentations about its safety. The company faced significant exposure to monetary damages claimed in product liability suits. . . . Plaintiffs allege that various studies conducted by Merck over the years it sold Vioxx reinforced the company’s concerns with the cardiovascular hazards of Vioxx. Merck's marketing of the drug attracted the attention of the FDA. . . . Yet, the Complaint alleges, all the while Merck continued to promote Vioxx as safe, sales increased, and the company’s stock price rose as a result. When the product was ultimately pulled from the market, the effect on Merck’s stock was severe.

In re Merck & Co., 2009 U.S. Dist. LEXIS 22923, at *3.

Similarly, here, although in hindsight it appears that Schering stock has recovered, the Complaint sufficiently alleges the existence of a dire situation during the relevant period. Plaintiffs’ Amended Complaint contains allegations that (1) study results regarding the efficacy of VYTORIN would greatly diminish both future VYTORIN sales and Schering-Plough’s earnings, thereby driving down the price of Schering-Plough’s Stock; (2) “[t]he $17.14 stock price drop between [the beginning and end of the Class Period] equaled a 55.29% drop in Schering-Plough’s capitalization, and a corresponding drop in the value of the Schering-Plough shares held in the accounts of the Plans’ participants and beneficiaries”; (3) Schering faced numerous governmental investigations regarding the disclosure of the ENHANCE study results, including the U.S. Justice Department, a group of 35 attorneys general, the House Energy and Commerce Committee, and the Food and Drug Administration; (4) Schering faced multi-million dollar product liability claims stemming from VYTORIN’s marketing. . . . In short, Plaintiffs assert that VYTORIN (the key product in Schering’s portfolio), was critical to the company’s continuing success -- and the above developments could potentially have a severe impact on the product’s sales.

The facts, as alleged by Plaintiff, are sufficient at this stage to meet the joint requirements of FED. R. CIV. P. 12(b)(6), Moench and Edgar. . . .

Once again, Ex-CEO Fred Hassan is named individually in this Gradone ERISA suit -- to be held personally responsible, by the plaintiffs, should they prevail, as would be Hans Becherer, the now-departed head of the Schering Board's Compensation Committee.

New Merck should really be thinking about settling all these cases -- there is a clear message in these -- not one, not two, but three rulings -- in seven days' time.

"Go East, Yang Man. . ." -- The Street's Advice

I know -- it is, talking here -- but it is intriguing (despite being a Jim Cramer property):

. . . .China Sky is set to report earnings of $2.41 a share for 2010, according to consensus estimates of analysts polled by Bloomberg. In comparison, Pfizer and Merck are likely to report earnings of $1.56 a share and $2.38 a share, respectively, for 2010. . . .

TheStreet is making the case that China's pharma companies may be a more compelling value that either Pfizer or Merck. Just so you know.

Another Perspective -- On the Louisiana Vioxx® Outcome

Last night, a federal judge in Louisiana held that the state could not sue Merck to recover what it alleged were overcharges for Vioxx®, given what Merck (allegedly) knew, but had (allegedly) failed to disclose, about the elevated cardiovascular risks associated with taking the painkiller, prior to 2004 -- when Merck withdrew Vioxx from the market. [Earlier background, here.] This outcome is likely to be the exception, rather than the rule, in my estimation. Why?

During the early part of this decade (2000 to 2005), Louisiana's state Medicaid machinery was essentially a "captive" of the big pharma industry players, by rule of local law.

Back then, the state apparently had no statutory authority to negotiate drug prices with the pharma companies -- so the judge ruled Louisiana couldn't (lawfully) have reduced the price it paid for Vioxx, even if it had shown that it would have desired to do so -- had it known about the problems with Vioxx, before Merck took the drug off the market.

In the larger commercial states, California, Illinois, New York, Massachusetts and New Jersey, for example (almost all of which currently have similar suits pending against Merck), the states DID, and DO have the right to negotiate/reduce pricing on the state's "formulary" drugs -- by so-called "tier" schemes, most commonly.

So, this may well be a case of Merck's "winning the battle, but losing the war" -- even if the appeal (which the state authorities have vowed to take) in Louisiana is unavailing.

Here's some of the history, from the judge's own decision:

. . . .Under federal law, state Medicaid programs are permitted, but not required, to offer prescription drug benefits to Medicaid-eligible individuals. . . .

States that decide to provide a pharmacy benefit receive both federal funding and rebates from pharmaceutical companies under the Medicaid Drug Rebate Program. 42 U.S.C.A. §§1396r-8(a), (b)(West 2003 & Supp. 2009). This rebate program -– created by the Omnibus Budget Reconciliation Act of 1990 (“OBRA 90”) -– requires a drug manufacturer to enter into a national rebate agreement with the Secretary of the Department of Health and Human Services (“HHS”) in order for states to receive federal funding for coverage of its drug products for Medicaid patients. Id. (See also Trial Tr. 663:3-17, 665:16-666:1, Apr. 15, 2010.) These rebates are shared between the states and the federal government according to their respective shares of the program’s cost. (Trial. Tr. at 665:16:16-661:1, Apr. 15, 2010.) In exchange for these rebates, which reduce the cost of the Medicaid programs, manufacturers are guaranteed coverage of their drugs under Medicaid, unless a particular drug is specifically exempted from coverage by the Medicaid statute. (Id. at 665:16:16-661:6.) See also 42 U.S. § 1396r-8(d)(2) (specifying categories of drugs excluded from Medicaid coverage). States may negotiate with pharmaceutical companies for supplemental rebates in addition to those provided under the federal rebate program. . . .

[P]rior to June 13, 2001, Louisiana law precluded the establishment of a Medicaid restrictive formulary. . . .

There are. . . four exceptions to the Medicaid mandatory reimbursement requirement. Coverage may be denied where: (1) a prescription is not made for a “medically accepted indication”; (2) a prescription is made for a category of drugs (such as barbiturates) or for an indication (such as smoking cessation) specified in 42 U.S.C.A. § 1396r-8(d)(2) or a drug has been determined by the Secretary of HHS to be subject to clinical abuse or misuse; (3) a state has executed a special rebate agreement with the manufacturer, approved by the Secretary of HHS, specifically restricting coverage of the prescription; or (4) a state has established a formulary meeting statutory requirements and exclusion of the drug from the formulary is based on the drug’s label and is for a specified population and/or condition for reasons of safety or efficacy, and the exclusion conforms with procedures set forth in the federal Medicaid statute (including making specified findings in writing and securing approval from the Secretary of HHS). 42U.S.C.A. §§ 1396r-8(d)(1), (2), (4). . . .

That is where the California, Illinois, New York and Massachusetts cases are likely to be fought, and decided -- in that last bolded bit of language. So, stay tuned.

[A sincere H/T Ed Silverman's fine Pharmalot piece, here.]

Tuesday, June 29, 2010

Soleil Securities (Who?) -- Merck is a "Hold" Stock, Just Like Bristol Myers Squibb(?)

Okay -- so, whoever really founded Soleil Securities Group (it looks like most of the founders had stints at Goldman Sachs & Co. in common, on their resumes, but that was all more than ten years ago, in each case), they've started Merck out as a "Hold" at $36 -- not an "Accumulate"; not a "Buy" (but also not a "Reduce" or "Sell"):

. . . .Pharmaceutical Stocks: Soleil Securities starts Eli Lilly at Sell and has new Holds on both Bristol-Myers and Merck. . . .

Net-net -- it probably means almost. . . nothing.

Monday, June 28, 2010

What REALLY Happened In Judge Keenan's Fosamax® Courtroom, Last Friday Morning?

Here is what Merck asked Judge Keenan to do -- by way of an 11 page letter (that's a full-text PDF of it). Since I wasn't present, I'll never be able to say for certain how much of this relief Judge Keenan granted Merck in the most recently-completed Fosamax® ONJ trial. What is known is that the jury awarded $8 million to Ms. Boles -- even after these skirmishes, instructions and counter-instructions.

I strongly suspect -- based on the matters alleged in the letter -- Judge Keenan gave Merck's lawyers most of what they asked for, in the letter. This is exactly the sort of thing I said (over the weekend, before the letter was made a part of the public electronic court records) a seasoned, sound and able trial judge would do. And he did:

. . . .15 minutes of additional closing argument/response to summation, in favor of Merck. . . . in addition, a set of curative instructions to the jury, and. . . revisions to the verdict form, and jury charge form. . . .

The net effect of all of these remedial measures -- if substantially granted by Judge Keenan -- would be actually to decrease (as opposed to increase), in my opinion, the chances that Merck will get this verdict set aside quickly. Years from now, a reduction, maybe -- but not likely set aside in its entirety. We'll see.

I'll Take "Half" -- Of A BP Gulf Spill, Here -- Thanks, Merck!

It just hit me: one other way to think about the aggregate size of liability this Boles II Fosamax® verdict would imply — would be to call it (when multiplied out) about "one-half" of the 2010 BP gulf oil spill claims fund.


The math, here: 1,500 times $8 million, equals $12 billion; bp's 2010 gulf oil spill fund currently equals $20 billion. Note that the Fosamax multiplication assumes no amount for Merck's own attorneys' fees -- in defending these matters. In fact, Merck has very-likely spent more than $30 million defending Boles I and Boles II, just on its own attorneys', and experts' fees. These costs will come down, on a per trial basis, as more and more are tried, but an on-going $5 million per trial -- in attorneys' and experts' fess, is a good (perhaps even conservative) guess.

Don't forget -- Whitehouse Station's reserves for such fees, at end of Q1 2010 (before Boles II began) stood at $52 million (see pages 56 and 57 of that SEC Form 10-Q link -- $38 million, minus $6 million, plus $20 million equals $52 million as at March 31, 2010). That is almost certainly all but gone, given the Maley trial (which Merck won -- probably cost about $15 million), and the Boles II trial (which Merck lost -- probably cost $28 to $36 million, for the two trials) -- most of which came after that figure was reported to the SEC in Merck's Q1 Form 10-Q. So, look for write-offs (and additions to the reserves) in the Merck Q2 SEC Form 10-Q financials.

Like I say -- Ouch.

Sunday, June 27, 2010

An Appalling Look Back -- At Some Schering Fiduciaries' Abdication -- Compensation Committee Outcomes

As a service to the readership, I thought I'd update an April 2009 analysis of what happens -- what the nearly-final outcome looks like -- when board of directors members (allegedly) abdicate their fiduciary duties. In this case, I've updated, for last Friday's New Merck stock prices, just one small portion of the vested gains Mr. Hassan is sitting on (assuming Bausch & Lomb hasn't already required him to sell the New Merck stock he holds) -- due to his having (allegedly) "effectively captured" the Compensation Committee, and manipulated its deliberative processes.

Again, to be clear -- this is only the tip of the iceberg -- but it may be the least justifiable tip. In future posts, I'll update his overall compensation package, for the near-$36 price of New Merck, at present. [Note that the figures in the overall graphic at right need to be "grossed up" -- by about an additional 30 percent or so, so the top end -- $173.4 million, at $28 -- looks more like $225.4 million, at around $36/share for New Merck -- I'll do the more detailed calcuations on some other lazy, rainy Sunday afternoon (but additional options became in the money, available and vested, when Merck crossed $31 per share last Winter -- in 2010).]

Okay -- here goes -- all date references have been edited, to make sense of the fact that the calendar now reads June 2010:

On April 24, 2008, Schering-Plough common stock closed at $17.86 on the NYSE. On that day, the board told the world, and the SEC, in the 2007 annual proxy (on page 22 near the bottom), that:

. . . .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. . . .

Now, on March 31, 2008, Schering-Plough stock closed at $14.20 on the NYSE. On April 24, 2008, it stood at $17.86. At year-end, December 31, 2008 -- Schering-Plough common stock closed at $17.03 per share (actually below the price on the day the board mailed the prior year's proxy).

Since when does agreeing to bust-up, and sell-off a company (on the cheap) qualify as "performance" under the Five Year Transformational Incentive program?

Since Ira Kay and Hans Becherer sat in review, I gather.

Immediately below (in dark green), is the 2009 disclosure -- and note well -- the quartile-chart (graphic at right) is nowhere to be found the prior year's (2008) proxy. Did the Compensation Committee "move the goal posts closer"? Who knows? It is clear that this disclosure wasn't shown in graphical form, in that prior (blue 2008) year. [See actual graphic, from Schering's 2009 annual proxy -- at right.]

Text (about at the middle of Page 29):
. . . .Actual TSR: Target -- 15%

Actual -- 0.72%

Relative -- (Negative 1.08%). . . .

. . . .As shown above, Schering-Plough failed to reach its targeted level of actual TSR but did achieve its targeted level of relative TSR. As a result, only 25% of each named executive’s target award was earned as shown below. . . .

Okay, in the blue text (the 2008 disclosure, a little bit above) did anyone notice a defined term called "Relative TSR"?

Nope -- me either. "Actual TSR" or actual total shareholder return -- for the five years was 0.72 percent. Yes. That is less than one percent. In fact, it is less than three-quarters of one percent. Overall, the Peer Group lost about one percent, in the same period -- but how does this remotely justify a 25 percent payout?

And yet, the Compensation Committee, chaired by Mr. Becherer, awared 25 percent of the five-year incentive to CEO Hassan, and the Top Five, for less than three-quarters of one percent of total actual shareholder return, during the five years.

For CEO Fred Hassan, alone, that equaled 198,488 legacy Schering-Plough units. Those units, at his termination (on the morning of November 3, 2009), became shares of legacy Scheirng-Plough common stock. Those shares were then converted into the right to receive $10.50 in cash, and 0.5767 shares of common stock of New Merck, for each of the 198,488 shares so held. So, the cash portion of this five year transformation payout was about $2.048 million -- and the stock portion was worth at least $7.132 million, at this past Friday's $35.93 New Merck NYSE closing price (June 25, 2010).

Again, an additional $9.28 million, on top of about $225 million, already awarded -- for less than three-quarters of one percent total shareholder return.

That is completely appalling. Whether one thinks Hassan & crew "saved" the company -- or busted it up -- $235 million is simply too much. Way. too. much.

By the way, does anyone else wonder why, exactly, Mr. Hassan was telling Wall Street that the cholestrol franchise's US sales were "generally stabilizing" toward the end of 2008 (near five year measurement time) -- when we only later learned (in late-April 2009) that the US Vytorin/Zetia month-by-month sales continued to fall an additional 15 percent, in sequential quarters (Q4 2008 to Q1 2009)? I am put in mind of at least $9.28 million reasons.

Saturday, June 26, 2010

Separating Hard Fact -- From "Wishful" Fiction -- Fosamax® Post-Trial Edition

There are more than a few reports circulating on the internet this weekend (largely from skittish investors -- concerned about where Merck's stock might open on Monday), that cite an overnight article -- to suggest that Judge Keenan will (somehow) summarily set aside last evening's Boles II Fosamax® jury verdict. These people point to remarks the able judge made from the bench, about the overly aggressive style of one plaintiff-lawyer's summation.

It is important to separate fact -- from wishful fiction, here. Judge Keenan is always in control of his courtroom. If he felt that the summation would unfairly enflame the jury, or unfairly prejudice Merck's rights, he could have (and may well have) instructed the jury to disregard the offending remarks (made in summation), and not take them into account, when deliberating.

Even if Judge Keenan decides to sanction the lawyer involved -- it would be quite another matter to infer that Judge Keenan would rule that the jury's verdict was "against the manifest weight of the evidence" -- and effectively hold that no reasonable jury could have found in favor of Mrs. Boles. That's a very tall order, for Merck.

In fact, Merck made just such a motion (called a Rule 50(a) motion), at the end of the trial, and Judge Keenan effectively denied it -- when he submitted the case to the jury, for deliberations. Just to keep it straight, here.

In short -- even if, months or years from now, Merck gets this verdict reduced on appeal -- it is highly unlikely that Judge Keenan will set aside four weeks of trial work, and a jury's verdict (after one mistrial had already been ordered in September 2009). Doubly so where -- as here -- the able judge had every opportunity to instruct the jury (and even allow Merck to respond in kind). Whatever he did, he did within the sound discretion of a very seasoned federal trial court judge.

Merck faces many very significant hurdles to getting this verdict nullified -- especially in less than a year. Maybe two or three years from now, Merck will get it cut to $5 million or $4 million, but Merck will still have to post a bond to file its appeal.


Note: I have no affiliation, monetary or otherwise, nor any arrangement with any party in any Merck legal proceeding, whatsoever. These are solely my uncompensated, independent personal opinions. That said, they are free, so they are worth what you've paid for them. Heh.

Two Fosamax® Trials, Back-To-Back? End of September, And November 2010?

Well, we know that Graves will be the next Fosamax® ONJ bellwether case tried in the federal courts -- in Manhattan (beginning November 1, 2010), but don't forget that -- according to Merck's most-recent Form 10-Q SEC filing -- the New Jersey State Supreme Court has ordered that a single state court judge, one Judge Higbee, sitting in Atlantic County Superior Court, will handle all of the 219 New Jersey state law cases (that figure as of March 31, 2010 -- there are likely more, now) alleging jaw injury from Fosamax, in a mass tort process -- for discovery purposes, and to try the first few cases as bellweathers, akin to the federal schema now underway in Manhattan, before Judge Keenan. From Merck first quarter 2010 SEC Form 10-Q, pages 56 to 57, then:

In. . . July 2008, an application was made by the Atlantic County Superior Court of New Jersey requesting that all of the Fosamax cases pending in New Jersey be considered for mass tort designation and centralized management before one judge in New Jersey.

As of March 31, 2010, approximately 219 cases were pending against Old Merck in the New Jersey coordinated proceeding. . . .

Judge Higbee advised that the first Fosamax trial in the New Jersey coordinated proceeding. . . [has been given] a tentative trial date of September 27, 2010. . . .

If the current schedule holds, then (i.e., no global settlement is reached) it will be a very busy fall for Messrs. Beausoliel and Strain -- on behalf of Merck.

I'll keep you posted, but after tonight's $8 million verdict -- the number of filings is sure to increase.

Friday, June 25, 2010

Boles II Fosamax® Trial -- $8 Million Unanimous Jury Verdict -- Wow!

See the Fosamax® verdict Bloomberg newsfeed, here.

Plainly, I guessed too low, this morning, over at Yahoo! -- but I had the arrow pointing in right direction [which (perhaps immodestly) was no mean feat, given the complete loss in Maley v. Merck, entered in the same courtroom, in May 2010. In addition, in one earlier case -- Fleming v. Merck, Merck won summary judgment from Judge Keenan]:
. . . .I'll go out on a limb, here, and despite the earlier mistrial (in Boles I) -- I'll predict low seven figures in damages for Ms. Boles. There are 1,100 additional cases pending, like this one. . . .

Do the math -- that's a "double Vioxx®". Timothy O'Brien, Mrs. Boles lawyer said tonight that the jury found Fosamax was a "defectively designed" product, and that Mrs. Boles felt "vindicated". It's a good thing she didn't fold, after the first mistrial was declared. I bet Juror No. 5 -- the reportedly lone holdout juror, from Boles I -- feels vindicated, as well [click from note from Boles I, to enlarge]:

Next Fosamax "bellweather" (or, "bellwether," if one prefers the Old Middle English spelling!) trial: November 2010 -- same courtroom, same very able federal trial judge.

A Few Questions PWC Should Have Asked Lori Queisser (Schering-Plough Alumna)

A rather stale PharmaLive story has PWC picking up another legacy Schering-Plough cast-off alumna. But not just any alumna. She was head of global compliance at legacy Schering-Plough.

So, did PriceWaterhouseCoopers ask Ms. Queisser about this, prior to hiring her? To be clear, I am certain she is a fine executive -- just as I am certain that compliance problems were rampant at legacy Schering-Plough long before she arrived in 2007. This one, more than most, though, smells like pharma run-amok. What was she doing about it (since 2007)? These are -- even today -- important questions, as New Merck will (once again) ultimately have to belly-up and pay Fred's bar-tab, here.

[H/T Ed, at Pharmalot.] Here's a snippet from the linked story:

. . . .PricewaterhouseCoopers LLP today announced that Lori Queisser, former chief compliance officer at Schering-Plough Corporation and Eli Lilly, is working with PricewaterhouseCoopers Governance, Risk and Compliance practice as a senior advisor to the firm’s pharmaceutical and life sciences clients. . . .

Most recently, Ms. Queisser was senior vice president, global compliance and business practices at Schering-Plough Corporation, a position she held since 2007. . . .

So, what went on in Vietnam, to ameliorate these practices, while you were at legacy Schering-Plough, Ms. Queisser? Training? Role-playing? The signing of adherence to global compliance standards statements? What, exactly? We would like to know -- we, the ex-shareholders -- of legacy Schering-Plough. We, who lost our lives'-savings.

European Medicines Agency To Review Potential ARBs -- Cancer Link

Exactly two weeks ago, a meta-analysis study conducted here in the U.S. found an increased incidence of certain kinds of cancers -- in patients taking ARBs -- a class of blood pressure medicines that includes losartan.

Losartan, of course, is the generic chemical name for Merck's Cozaar® -- a rapidly swooning (now available as a generic) $3.5 billion a year worldwide franchise. Today, the European Medicines Agency, via its Committee for Medicinal Products for Human Use ("CHMP") will do a deeper dive on the data in that study, and make some inquiries of its own -- per Reuters reporting this morning:

. . . ."The CHMP will review the meta-analysis thoroughly, together with any other available non-clinical and clinical data. . . to clarify whether there is an increased risk of cancer in patients taking these medicines," the drugs agency said in a statement. . . .

Other drugs in the class include Merck & Co's Cozaar, sold generically as losartan; Atacand, or candesartan, made by the Anglo-Swedish firm AstraZeneca (AZN.L), Diovan or valsartan made by Swiss drug firm Novartis, irbesartan, jointly marketed by Sanofi-Aventis and Bristol-Myers Squibb as Avapro, Daiichi Sankyo's Benicar or olmesartan, and Solvay Pharmaceuticals' Teveten or eprosartan.

The Medicines Agency said the CHMP would give an opinion after the investigation on whether changes should be made to the product information or risk-management plans for ARBs. . . .

We'll keep you posted. In other Europe news, Saphris® (branded there as Sycrest® -- chemical name: Asenapine) drew a positive review from the CHMP for treatment of manic bipolar episodes -- thus, it will likely be approved in the EU, within a couple of months.

Thursday, June 24, 2010

Merck Has Rested Its Boles II Fosamax® "Bellweather" Defense Case

More later tonight -- but the Boles II Fosamax® defense team has concluded its portion of the case. Now come summations, or closing arguments, the jury charges and then deliberations. Will Judge Keenan hand the case to the jury, tomorrow -- or Monday?

. . . .Defendants rest. . . .

I'll let you know.

FDA Approves Dulera®; NOT Likely To Cause Any Lasting Stock Price Increase. Why?

Merck just received FDA approval for Dulera® this morning. However, Dulera is essentially Nasonex® [essentially mometasone furoate, depicted at right -- click to enlarge], mixed as a fixed-dose combination, with the main active ingredient in Foradil®. That is to say, Dulera contains a long acting beta2-adrenergic agonist, or a LABA, for short. Quite rightly, based on recent monitoring, and adverse event reports, FDA has stepped up the black box warnings on that class of drugs. Here is part of the Dulera warning FDA mandated, as part of the approval:

. . . .long-acting beta2-adrenergic agonists (LABA), such as formoterol, one of the active ingredients in Dulera®, INCREASE the risk of asthma-related DEATH.

Available data from controlled clinical trials suggest that LABA increase the risk of asthma-related hospitalization in pediatric and adolescent patients.

Therefore, when treating patients with asthma, Dulera should only be used for patients not adequately controlled on a long-term asthma control medication, such as an inhaled corticosteroid or whose disease severity clearly warrants initiation of treatment with both an inhaled corticosteroid and LABA. . . .

Dulera is contraindicated in the primary treatment of status asthmaticus or other acute episodes of asthma where intensive measures are required. Dulera is contraindicated in patients with known hypersensitivity to any of the ingredients in Dulera.

Dulera is NOT a rescue medication and does NOT replace fast-acting inhalers to treat acute symptoms. Increasing use of inhaled, short-acting beta2-agonists is a marker for deteriorating asthma. In this situation, the patient requires immediate re-evaluation with reassessment of the treatment regimen. . . .

Thus this drug is really only appropriate for a very small portion of the asthma population -- the most severely ill. And so, in my opinion, Dulera enters a crowded field, with a black box warning, and (at best) will "cannibalize" the legacy Schering-Plough drug branded as Foradil®.

Wednesday, June 23, 2010

Did Merck Just Create Its Own "Sinkhole," In The Boles II Fosamax® Trial?

This afternoon, the trial lawyers for Shirley Boles have asked the very able Manhattan federal District Court Judge Keenan to instruct the jury on a peculiar wrinkle in Florida medical malpractice law (the state law that governs Mrs. Boles' claims, as she resided there when the injuries occured), here toward the end of Merck's defense case.

It seems that, during Merck's opening arguments, its lawyers argued -- in part -- that Mrs. Boles' injuries are more likely the result of an oral surgeon's subsequent alleged mistakes, as opposed to Mrs. Boles' prolonged use of Merck's Fosamax®.

Well, that effectively "opened the door", to a whole line of analysis, by the jury -- about whether, and to what extent (on a percentage basis), Merck should remain liable, even for the allegedly aggravated injuries Mrs. Boles suffered -- if the jury finds that the prolonged use of Fosamax was at least one "substantial" cause. Here is a portion of the proposed 15 page jury charge the plaintiff is asking Judge Keenan to hand the jury, on the topic (click to enlarge):

We are now approaching the moment when this case will be given over to the jury -- and I'll keep you informed -- of any verdict, up or down.

Merck/Schering-Plough ERISA Enhance Class Action -- Judge Cavanaugh's Patience Tested?

For the second time in three days, the very able Judge Cavanaugh (sitting in the federal District courts in Newark, N.J.) has issued an opinion, essentially admonishing lawyers for Merck (and previously, for Schering-Plough) not to make repetitive arguments -- especially ones he's already ruled against.

This afternoon, the opinion was handed down in the ERISA case -- Cobb v. Merck -- which arose out of the declines in Merck and Schering-Plough stocks, held in employees' (and retirees') retirement accounts. These declines were attributable to the delayed Enhance disclosures, the ERISA plaintiff-shareholders allege. [Yesterday, a ruling for all affected shareholders, not just employees/retirees, was handed down -- see here.]

Were I representing Merck and legacy Schering-Plough, I'd be very careful not to test the patience, and tax the resources, of the federal courts, here. Otherwise zealous defense of litigation becomes abusive, or "vexatious" with the mere stroke of a judge's pen. Counsel should keep that top of mind, from now on. In any event, here is the opinion, and a snippet:

. . . .[W]here a defendant asserts "that the complaint fails to state any claim," and "the Court already has expressly addressed and rejected this argument [i.e., found that Plaintiffs adequately stated a claim for relief]", Defendants are not permitted to reassert this argument. . . in the guise of an affirmative defense". . . . Similarly, here, Defendants’ Answer asserts that "[t]he Complaint, with respect to each and every claim stated therein, fails to state a claim upon which relief may be granted." (emphasis added). This Court has already stated that the Complaint has adequately plead certain claims, see Doc. No. 49, and the defense is, therefore, no longer appropriate.

The Court, in accordance with the discussion above, will strike Defendants’ first "affirmative defense". . . .

As to defenses numbered 7, 8, 11, 12, 16, 18, 20 and 22, the Court will strike them as being denials instead of affirmative defenses. A mere denial as to the sufficiency of Plaintiffs’ claims is not an affirmative defense. . . .

These are judicial "tea leaves" -- and Merck should read them, very carefully.

More Credit, For Merck -- From "The 2010 Access To Index Medicines" Report

Overnight, one of my anonymous commenters took me to task for "failing to tell the whole story" -- about the just-released Access to Medicines 2010 Report, and Merck's very high scoring on it.

This is newsworthy, indeed -- Merck's Mectizan® river blindness initiative is almost unfathomably generous and humane -- but there is much more to laud, about Merck's work in this area, generally. From the full-text report, then [and, click image at right to biggify graphic]:

. . . .Merck has three innovative in-house investigative candidates in its pipeline related to the Index Diseases (two compounds for diarrheal diseases and one investigative candidate for lower respiratory tract infec-tions). To address diarrheal diseases, Merck is carrying out a Developing World study of its RotaTeq vaccine in infants up to 12 weeks (currently in phase III clinical trials). Merck is also one of the few companies currently carrying out discovery research for dengue and the only Index 2010 company to carry out discovery research for meningitis. The Index only includes innovative R&D for non-communicable diseases where the primary purpose is to fulfill an unmet need in the Index Conditions, since R&D for non-communicable diseases tends to be conducted primarily for developed country needs. Overall, Merck’s innovative research pipeline is well above average compared to sector peers. . . .

Yet Merck is perhaps most well-known for its long-standing MECTIZAN Donation Program for treatment of river blindness (onchocerciasis) and Elephantitis (lymphatic filariasis). Begun in October 1987, Merck committed to donate MECTIZAN to treat river blindness for as long as required and wherever needed -- until the disease has been eliminated worldwide. Due mainly to Merck’s efforts in this area, transmission of river blind-ness is expected to cease in the Americas by 2012 and Merck and supporting partners plan to achieve 100% geographic coverage for all affected individuals with river blindness by 2015. The program was expanded in 1998 to include another ID -- Elephantitis (lymphatic filariasis) which is treated using Merck’s MECTIZAN in conjunction with GSK’s albendazole. Elephantitis is expected to be eliminated as a public health issue by 2020. To date, Merck has donated 2.5 billion in tablets (worth $3.9 billion) and has invested $35 million in financial support to date for the program. In line with best practices, Merck has a method for ensuring that donated products reach their targeted countries. For MECTIZAN Merck ensures that donations reach their intended destinations by requiring that a certificate of receipt be signed by the receiving in-country organization, which is above average compared to other companies. . . .

Okay, then -- credit -- where credit is due.

Tuesday, June 22, 2010

Ex-CEO Hassan Loses Motion For Reconsideration: Enhance Securities Law Class Actions

Just this morning, Judge Cavanaugh issued an opinion, from the bench, in the federal District courthouse in Newark, New Jersey -- denying an attempted "classic second bite at the apple", for Fred Hassan, Hans Becherer, Carrie Cox, Patricia Russo, C. Robert Kidder, Tom Koestler and Tom Sabatino, among others. Each of these individuals is now about three steps closer to having to swear under oath about their respective roles in the Enhance delayed disclosure debacle. That debacle may fairly be seen as the most important single event in a chain of causation that led to the death of Schering-Plough as an independent publicly-traded pharma company. "Nice shootin' there, Tex!" From today's opinion, then:

. . . .Bearing in mind that this Court considered Iqbal [a newer Supreme Court decision], Defendants' motion to reconsider fails to demonstrate any intervening change in controlling law, presents no new evidence, and does not show a need to correct a clear error of law or prevent manifest injustice. In addition, Defendants' brief raises challenges to the factual allegations made by Plaintiffs in their Complaint, but attempts to couch these challenges in terms of art used in the Iqbal decision. In failing to persuade the Court to dismiss Plaintiffs' Complaint in their original motion to dismiss, Defendants' instant motion appears to be a "classic attempt at a second bite at the apple," Bhatnagar v. Surrendra Overseas Ltd., 52 F.3d 1220, 1231 (3d Cir. 1995), and simply a vehicle to "rehash arguments which have already been briefed by [Defendants] and considered and decided by the Court." Id. Consequently, Defendants' request that the Court reconsider its Opinion and Order, dated August 31, 2009, is denied. . . .

Buckle-up, Fred, Hans, Carrie, Patricia, Bob, Tom, and Tom -- your deposition seats are now just about set to go!