Sunday, January 16, 2011

UPDATED: The New Merck "We've Overpaid!" Table -- F/K/A "Hassan Hangovers"

There is very little lipstick left on this particular pig, one that Fred Hassan, and Carrie Cox, and Bob Bertolini, and Raul Kohan, and Brett Saunders. . . and Tom Sabatino all tricked Merck into kissing -- to the tune of $49 billion, about a year and a quarter ago -- take a look -- let me know if I missed any others:

Key ImageDrugCounter PartyStart DateEnd DateFieldReason
(SCH 530348)
Internal (Legacy
Jan. 2004Ongoing,
but cur-
tailed, in
Jan. 2011
(A DSMB Stop)
Safety Board
discontinued dosing
in stroke patients;
in two Phase III
studies, due to
bleed-through prob-
lems(?) Unknown.
Various (Biosciences)Internal (Legacy
Organon BioSciences
Oct. 2008Nov. 2009Bioscience R&DAllegedly didn't
follow Dutch labor laws
Saphris®/Sycrest®Lundbeck (All Markets, Except US,
Japan and China)
Dev. 1996Oct. 2010Anti-psychoticsDisappointing "Me Too" Sales; Side effects
Plough Con-
sumer Health

(Dr. Scholls, etc.)
Internal (Legacy
Pre-2000In 2011(?)OTC Health CareToo much ad-
vertising spend
, to sus-
tain mature
branded items
(like Dr. Scholl's),
for only $275M
in annual sales.
AN-2690Anacor PharmaFeb. 2007May 2010Anti-FungalNon-Core to Merck
VicrivirocInternal (Legacy
Mid 2005Jan. 2010HIVClanked two separate
Phase III trials
AcadasineInternal (Legacy
April 2004Aug. 2010CardioClinical Futility
AV-299AVEO PharmaApril 2007Sept. 2010OncologyNon-Core To New Merck
Ampakine®Cortex PharmaJan. 1999Oct. 2010Anti-PsychoticNon-Core To New Merck
J&J/CentocorQ1 2004Q1 2011(?)Auto-ImmuneLost Arbitration(?);
or settled, unfavorably(?)

Again, an entirely separate category would be the litigation blunders/hangovers, but that table would take several pages:

So all in, this table likely represents more than $20 billion of "lost" opportunities [if we were to believe, at face value, the prior "puffing" statements of the various Schering-Plough senior executives -- Hassan, Cox, Bertolini, Kohan, Saunders and Sabatino]. Sheesh. Truly unfortunate.


Anonymous said...

your table should be a lot longer because there are more compounds that got snuffed, but any table will only have a real impact in case the estimated value is shown for each compound imho. Merck's strategy may have been to buy S-P just for a few interesting compounds, and chuck the ones that were kept in the pipeline for window dressing.

Pharma remains to be a high risk investment.

condor said...

Oh -- I agree with you, Anon.

This table would be pages long, if I included all the R&D drop-outs since Merck began busting up Schering-Plough.

I have endeavored to only mention truly material candidates/deals.

By that, I mean ones that CEO Hassan, Peter Kim, Bob Bertolini or Raul Kohan touted as being one of the "Five Stars" in 2008/2009, "important" or a "potential blockbuster".

The trick is to guess at actual sales potential. I don't have statements from Hassan & Co., for each of these -- but it is known that at one time or another, some senior executive at legacy Schering-Plough called for sales of more than $1 billion per year -- on each of these candidates.

In each case, now, that. will. never. happen. [Ooh! that reminds me -- I should add the legacy S/P Consumer Health (@ ~ $275 million annual sales, on the waifish side, for New Merck) to the table -- as New Merck CEO Ken Frazier has said he is looking at spinning it, or selling it off. Thanks!]

Finally, and importantly, Remicade Simponi is known -- and it is probably $10 billion over the next three years alone -- and New Merck may well lose it, due to some unduly cute-lawyering by Schering-Plough's internal legal team.

So all in, this table likely represents more than $20 billion of "lost" opportunities [if we were to believe, at face value, the prior "puffing" statements of Schering-Plough executives].

Namaste -- and look for the S/P Consumer Health addition in a moment.

Anonymous said...

you are so right, but is there any investor or analyst who is looking at things this way?
EPS seems to be the single most important thing, the fact that this company seems to be eating itself from the inside and is burning money at a staggering rate is seemingly unimportant.

Anonymous said...

You may want to confirm, but I think consumer business does over $1b in sales annually.