Monday, February 28, 2011

Merck Confirms That IF It Loses J&J Arbitration -- It Will Record Multi-Billion Dollar Impairment Charge

I found this new disclosure (not present in the last Form 10-Q) in Merck's just-filed SEC Form 10-K (at page 31) pretty interesting -- especially in view of the fact that (at page 61) Merck indicated it had written down the values of the Vorapaxar program (by over $1.7 billion) in early 2011. These sorts of non-cash charges erase vast swaths of shareholders' equity, even though (often, like Vorapaxar) only a tiny portion is cash-based.

In contrast though, a J&J arbitration loss would likely involve over $10 billion in cash losses, over just the next three years. Ouch.

In any event, here is the quote:

. . . .Sales of Remicade and Simponi in 2010 were $2.7 billion and $97 million, respectively. An unfavorable outcome in the arbitration would have a material adverse effect on the Company’s financial position, liquidity and results of operations. In addition, the Company would be required to record a material, non-cash impairment charge with respect to the termination of those marketing rights.

Finally, due to the uncertainty surrounding the outcome of the arbitration, the parties may choose to settle the dispute under mutually agreeable terms but any agreement reached with Centocor to resolve the dispute under the Distribution Agreement may result in the terms of the Distribution Agreement being modified in a manner that may reduce the benefits of the Distribution Agreement to the Company. . . .

As you can also readily see there is also a hint of settlement of the J&J arbitration, at page 31 of the SEC Form 10-K. We'll keep you posted.

Supremes Hint (Via Silence) That Most Pharma Reps Must Be Paid Overtime

The US Supreme Court has declined to hear arguments out of the Second Circuit that were intended to keep Novartis, Schering-Plough (and now Merck) from having to pay overtime to the sales reps of each.

But, as we've repeatedly noted -- these "sales" reps are not selling anything, in the traditional sense -- so this ruling (or lack thereof) makes good common sense.

While other circuits have come out the other way, denying pharma reps O/T, it seems clear that the Supremes see these folks as more akin to hourly workers, with set schedules (and thus protected by, and subject to US DoL overtime pay rules).

And so, the Second Circuit's last order will be the final word on this matter:

. . . .Defendant Schering Corporation ("Schering") appeals pursuant to 28 U.S.C. § 1292(b) from an order of the United States District Court for the District of Connecticut, Janet Bond Arterton, Judge, which denied its motion for summary judgment dismissing the claims of plaintiffs, pharmaceutical sales representatives ("Reps") formerly employed by Schering, for overtime pay under the Fair Labor Standards Act of 1938 ("FLSA"), 29 U.S.C. § 201 et seq. Schering moved for summary judgment, arguing that Reps fall within the FLSA's exemption for "outside salesm[e]n," 29 U.S.C. § 213(a)(1). In a ruling dated March 30, 2009, and reported at 604 F.Supp.2d 385, the district court denied Schering's motion, concluding that, because the Reps undisputedly do not sell or make sales as those terms are defined in the FLSA and the regulations promulgated thereunder by the Secretary of Labor, the Reps fall outside the FLSA's outside sales employee exemption. In an order dated April 17, 2009, the district court certified its order denying summary judgment as worthy of an immediate appeal pursuant to § 1292(b). Schering petitioned this Court, as required by that section, for leave to appeal; we granted the petition and heard Schering's appeal in tandem with the appeal in In re Novartis Wage and Hour Litigation, No. 09-0437-cv. We assume the parties' familiarity with the remaining facts and procedural history of the case.

On appeal, Schering contends that the district court erred as a matter of law in determining that the Reps were not exempt outside salesmen. We disagree. The burden of proving that employees fall within an exemption from the FLSA overtime pay requirements is on the employer. See, e.g., Bilyou v. Dutchess Beer Distributors, Inc., 300 F.3d 217, 222 (2d Cir. 2002). Reviewing the matter de novo, and taking the record in the light most favorable to the plaintiffs, see, e.g., Dillon v. Morano, 497 F.3d 247, 251 (2d Cir. 2007), we conclude, for the reasons stated in the district court's well-reasoned ruling, see 604 F.Supp.2d at 395-403, that Schering did not meet its burden. Accordingly, we affirm the order denying summary judgment for the reasons stated in the district court's ruling and for the reasons stated in our opinion in In re Novartis Wage & Hour Litigation, No. 09-0437 (2d Cir. July 6, 2010), also issued today.

We have considered all of Schering's contentions on this appeal and have found them to be without merit. . . .

That is where we now stand.

Now Confirmed: New Merial Launch Is Being Delayed By Antitrust Concerns

In keeping with my well-experienced conjecture (but mere conjecture, nonetheless) of about a month ago. . . Whitehouse Station today confirmed to Pete Loftus of the Wall Street Journal that the New Merial JV would not be up and running before the third quarter of 2011.

Merck's earlier projection was for a March 2011 closing on that deal. Sanofi's CEO made some public comments back in December 2010 that hinted at a later closing (like second half of 2011).

All in all, I am sure Pete is right -- that the antitrust regulators in the US and Europe are giving the JV a very close review -- as it stands, it could control nearly 30 percent of the worldwide animal health market -- if not tweaked by forced divestitures (like the one I mentioned last month)

. . . ."To ensure competition among companies in the industry, the regulators continue to look closely at the intended JV combination and how we address possible overlap in our portfolios," said Steve Campanini, a Merck spokesman. "We are executing the antitrust process with great care with the goal of leading it to successful approval. It is a process that varies with each transaction, and so it is difficult to predict precisely the timing. . . ."

Paris-based Sanofi said earlier this month it expected the deal to close in the 2010 first half. A spokesman declined immediate comment.

Merck and Sanofi knew from the start they would probably have to divest themselves of certain products to appease antitrust regulators. One possible area is poultry vaccines, for which their combined market share would be about 75%, the U.S. Federal Trade Commission said in a report in 2009. . . .

Wow -- that's a monopoly! Stay-tuned.

Merck's FujiFilm Deal: More Of Schering-Plough, Busted-Up

Recall that Diosynth was part of legacy Schering-Plough -- making it another piece of the bust-up/yard sale, just delayed by 18 months (per Bloomberg):

. . . .The company will buy BioManufacturing Network Diosynth RTP LLC of Research Triangle Park, North Carolina, and MSD Biologics (U.K.) Ltd., based in Billingham, England. The deal for the units, which generate about 13 billion yen in sales a year, should be completed by early April, Matsumoto said. . . .

Fujifilm plans to triple sales in health care in the next decade as the market for supplying biologic vaccines and drugs is expected to increase by 15 percent a year, it said. The deal comes as sales from its imaging solutions, which includes color films and digital cameras, fell 16 percent last fiscal year as more consumers use smartphones for taking photos. . . .

As a side-note, there is little doubt that Fuji is in a tight spot, with the contiuning (and likely permanent) decline of traditional chemical films. That said, I am not at all sure that operating vaccine manufacturing plants is going to be the right answer for Fuji's manifold ills.

For the core mission of this blog, though, this is yet another guidepost pointing to the now-inescapable destination: the Schering-Plough to Merck deal was always going to be a "bust-up play".

UPDATE: There is almost no doubt that this deal will clear antitrust review quickly -- even though it is likely north of $500 million in aggregate value. Fujifilm will be a decidely unconcentrated buyer, here -- this transaction should be granted early termination of the applicable waiting period, under Hart-Scott-Rodino.

Sunday, February 27, 2011

Merck Sheds Its BioManufacturing Hard Capital Assets (But Not The Intangible Ones)

Merck will apparently act as a contract research and development operation for Fujifilm under this deal -- so it is likely retaining the patents and other intellectual property, but transferring to Fujifilm (or about $500 million) the hard capital assets in the manufacturing network.

This is a smart move, financially -- as it takes some of the asset load off the New Merck balance sheet, instantly increasing Merck's return on assets, even with no increase in the overall earnings levels. I won't go so far as to call this move pure "financial engineering," but there is a definite whiff of that, here (story per Reuters, as of Sunday night):

. . . .Financial terms of the deal were not disclosed, but Japanese business daily Nikkei said it will be for around 40 billion yen ($490 million).

Under terms of the agreement, Fujifilm will purchase all of the equity interests in two Merck units, Diosynth RTP LLC and MSD Biologics Ltd, which together own all assets of the Merck BioManufacturing Network comprising plants in Research Triangle Park, North Carolina, and Billingham in Northeast England.

"This acquisition provides an important addition to our pharmaceutical business with diverse capabilities and technical expertise in production of protein therapeutics," Fujifilm Chief Executive Shigetaka Komori said in a statement on Sunday.

As part of the agreement with Fujifilm, Merck has committed to certain continued development and manufacturing activities with the two units it is selling. . . .

Merck said in a statement that it will become a key customer and that it will continue to benefit from the expertise and experience of the combined businesses in biologics development and manufacturing. . . .

Stay-tuned -- as we'll see in the coming weeks what additional announcements are made -- about employee levels -- at these now Japanese-owned facilities.

Friday, February 25, 2011

Consumer Fraud Claims ALMOST Ready To Be Paid In 2008-09 Vytorin ENHANCE Study Non-Disclosure Debacle

Now, almost a year and a quarter after Schering-Plough winked out of existence -- in large measure due to the egregiously poor decision-making of Fred Hassan and Carrie Cox, et al., related to the ENHANCE study results -- people who took what may turn out to have been a very-expensive placebo are about to receive class payouts on the debacle.

There are still about seven additional class action style peices of litigation pending, on the matter -- but this was the first of them to settle. From the proposed final order in Judge Cavanaugh's courtroom:

. . . .Consumer claimants (including those who improperly filed using a TPP claim form) filed a total of 38,283 claims, for purchases totaling $52,193,376.27. After Rust’s claims administration and auditing process including discussions with Class Counsel, Rust proposes that 1,358 Consumer claims be found ineligible and the remaining 36,925 Consumer class members whose purchases total $46,046,928.70 be considered eligible. . . .

Stay tuned for final payout figures, but remember that Hassan, and his tops six executives collectively carted off around $500 million in severance payments, when Schering-Plough winked out of existence on November 3, 2009. Disgusting.

Thursday, February 24, 2011

Merck Capital Ventures LLC Adds To Smallish, Odd-Lot Play In Gene Expression Diagnostics Co.

Even though the Merck Capital Ventures LLC's website is down, it is -- in fact (per page 4 of this SEC filing -- Exhibit 21, to the last Form 10-K) a less-than wholly owned sub of Merck. So, we'll follow its capital-infusion moves, on behalf of ole' Mother Merck.

Merck appears to have something around $20 million invested in privately held HTG -- a molecular technology solutions company, out of Tuscon, Arizona. [Bonus: HTG is hiring -- and the jobs are located in the Sun-belt to boot! Ex-Merckies are welcome to apply!] In any event, here is the item, from an HTG presser of this morning:

. . . .HTG, Inc., provider of molecular technology solutions, today announced the closing of a Series D financing round led by new investor Novo A/S. Fletcher Spaght Ventures (FSV) also a new investor, joined the round along with existing investors Merck Capital Ventures, Solstice Capital and Valley Ventures.

The new financing will be used to fuel the growth and adoption of HTG's multi-plex gene expression testing platform for validation and clinical applications across different therapeutic areas. HTG's qNPA platform is in use at major academic and cancer research centers as well as big pharma. This cash infusion will help drive additional utilization across these areas as well as into new high growth molecular diagnostic opportunities. The company will also be looking to hire additional personnel in 2011 including sales and marketing, operations and development scientists with particular experience working in diagnostics. . . .

Diagnostics hasn't been a priority for Merck in over a decade. And so, it is doubly curious that the Merck Capital Ventures website is a blank page at the moment. I wonder whether it will be spun off, to the principals, after Dick Clark is settled into his semi-retired role (doesn't he have a place in Arizona?). We shall see whether it appears on Exhibit 21 of this year's SEC Form 10-K, in just a few weeks.

Wednesday, February 23, 2011

Merck CFO To Present: 8 AM EST, Next Tuesday -- To Citi's Healthcare Conference -- In Manhattan

We'll all tune in then:

. . . .Merck & Co., Inc.
at Citi Global Healthcare Conference

Tuesday, March 1, 2011
8:00 a.m. ET

New York, NY. . . .

We'll liveblog any high- (or low-)lights. Expect easy questions, given that Citi received a lead role in, and large fees from Merck's last $2 billion debt underwriting -- in December 2010. Also recall that Citi has a $34 target on Merck. Will there be any announcement on the J&J arbitration? Wild.

§ 1501 Of The Affordable Care Act Is Constitutional: Score Now 3 to 2 In The District Courts -- On To The Supremes!

Given the gravity of the question, it is time for the federal appellate courts to simply certify this plain spit among the federal trial courts, in the various federal districts -- and kick the various cases directly to the Supremes. It is no longer likely that any one federal appellate court is going to harmonize all of Judge Hudson's, and Judge Vinson's, "novel" (erh, erroneous) analyses with the three trial court opinions that have adhered to three-quarters of a century of Supreme Court precedents. It just isn't.

So, why waste taxpayer money at the appellate level? We all know this is a matter to be decided in the United States Supreme Court. Let's get on with it, forthwith.

In any event, you may read all 64 pages of the latest (PDF file) memorandum opinion for yourself, here -- but this is the core of it:

. . . .When considered together, as they must be, Wickard, Lopez, Morrison, and Gonzales establish three major lines of inquiry. See id. at 15, 125 S.Ct. 2195 (“[N]one of [the] Commerce Clause cases can be viewed in isolation.”). First, the Court must consider whether the decision not to purchase health insurance is an “economic” one, like the activities in Wickard and Gonzales, or a “non-economic” one like those in Lopez and Morrison. Second, if the decision is economic, the Court must determine whether Congress had a rational basis for concluding that such decisions, when taken in the aggregate, substantially affect the national health care market. Third, the activity may be found to be within the reach of Congress’s Commerce Clause power if it is “an essential part of a larger regulation of economic activity, in which the regulatory scheme could be undercut unless the intrastate activity were regulated.” Lopez, 514 U.S. at 561, 115 S.Ct. 1624. . . .

In undertaking this analysis, the Court is mindful of the proper balance of power among the different branches of the federal government and, in particular, of its duty to apply a presumption of constitutionality when reviewing laws passed by Congress. See Morrison, 529 U.S. at 606, 120 S.Ct. 1740 (“Due respect for the decisions of a coordinate branch of Government demands that we invalidate a congressional enactment only upon a plain showing that Congress has exceeded its constitutional bounds.”). . . .

When it enacted § 1501 of the Affordable Care Act, Congress made several findings, chief among them the general finding that “[t]he individual responsibility requirement provided for in this section. . . is commercial and economic in nature, and substantially affects interstate commerce.” ACA § 1501(a)(1). Thus, there can be no doubt that it was the intent of Congress to invoke its Commerce Clause power in enacting § 1501. . . .

Congress has clear authority under the Commerce Clause to regulate the insurance markets because insurance policies are “commodities” in the flow of interstate commerce. South-Eastern Underwriters Ass’n, 322 U.S. at 552-53, 546-47, 64 S.Ct. 1162. Both the decision to purchase health insurance and its flip side--the decision not to purchase health insurance -- therefore relate to the consumption of a commodity: a health insurance policy.

It therefore follows that both decisions, whether positive or negative, are clearly economic ones. See Gonzales, 545 U.S. at 25-26, 125 S.Ct. 2195 (“‘Economics’ refers to ‘the production, distribution, and consumption of commodities.’”) (quoting Webster’s Third New International Dictionary 720 (1966)). . . .

Next, the Court must determine whether Congress had a rational basis for concluding that such decisions, when considered in the aggregate, substantially affect the national health insurance market. The findings on this subject could not be clearer: the great majority of the millions of Americans who remain uninsured consume medical services they cannot pay for, often resulting in personal bankruptcy. In fact, the ACA’s findings state that “62% of all personal bankruptcies are caused in part by medical expenses.” ACA § 1501(a)(2)(G), as amended by § 10106. Of even greater
significance to the national economy is the fact that these uninsured individuals are, in fact, shifting the uncompensated costs of those services -- which totaled $43b illion in 2008 -- onto other health care market participants, as well as federal and state governments and American taxpayers. See ACA §§ 1501(a)(2)(F), (G), as amended by § 10106; Thomas More Law Ctr., 720 F.Supp.2d at 894. Because of this cost-shifting effect, the individual decision to forgo health insurance, when considered in the aggregate, leads to substantially higher insurance premiums for those other individuals who do obtain coverage. According to Congress, the uncompensated costs of caring for the uninsured are passed on by health care providers to private insurers, which in turn pass on the cost to purchasers of health insurance. “This costshifting increases family premiums by on average over $1,000 a year.” ACA § 1501(a)(2)(F), as amended by § 10106. Thus, the aggregate effect on interstate commerce of the decisions of individuals to forgo insurance is very substantial. . . .

For the foregoing reasons, the Court finds that Congress had a rational basis for its conclusion that the aggregate of individual decisions not to purchase health insurance substantially affects the national health insurance market. Consequently, Congress was acting within the bounds of its Commerce Clause power when it enacted § 1501 in order, as Chief Justice Marshall said, “to prescribe the rule by which [interstate] commerce is to be governed.” Gibbons, 9 Wheat. at 196, 6 L.Ed. 23. Thus, Defendants’ Motion to Dismiss on the basis that Plaintiffs have failed to state a constitutional claim is granted. . . .

As the Supreme Court recently noted, the Necessary and Proper Clause “grants Congress broad authority to enact federal legislation.” United States v. Comstock, 130 S.Ct. 1949, 1956, 176 L.Ed.2d 878 (2010). “Let the end be legitimate, let it be within the scope of the constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the constitution, are constitutional.” McCulloch v. Maryland, 4 Wheat. 316, 421, 4 L.Ed. 579 (1819). Courts look to see whether the challenged statute constitutes a means that is “rationally related to the implementation of a constitutionally enumerated power” when determining whether it falls within Congress’s power under the Necessary and Proper Clause. . . .

[Editor: It is. Q.E.D.]

. . . .§ 1501 is a clear-cut example of “an essential part of a larger regulation of economic activity, in which the regulatory scheme could be undercut unless the intrastate activity were regulated.” Lopez, 514 U.S. at 561, 115 S.Ct. 1624. . . .

Prediction: this will be ultimately decided by the Supremes, with (surprisingly) Chief Justice Roberts authoring a majority opinion declaring that the mandate passes Constitutional muster. You read it here first, last year.

Tuesday, February 22, 2011

JAMA Article: Long Term Fosamax® & Atypical Femur Fractures

The evidence begins to pile up here (as the lawsuits continue to roll in). To wit: unless an older woman has full-on osteoporosis, it may no longer make sense for her to be on Fosamax® for any extended period of time (three or more years), without a drug holiday.

Per Bloomberg reporting, tonight:

. . . .Merck’s Fosamax was the first bisphosphonate marketed to treat and prevent osteoporosis in older women. The drug reached sales of $3.19 billion in 2005 before facing competition from cheaper generic copies. The drug had sales of $926 million last year, according to data compiled by Bloomberg. Merck is based in Whitehouse Station, New Jersey. . . .

Three previous studies were unable to prove a link between bisphosphonates and the atypical fractures. Those studies were smaller and focused mostly on women who took the drug for fewer than five years, the researchers said.

Today’s research, funded by the Ontario Ministry of Health, examined records of 205,466 women over the age of 68 who were treated with bisphosphonates between 2002 and 2008. Scientists identified 716 women who had the atypical fractures. . . .

We'll keep you posted.

Sotomayor Was Right -- Scalia Was Wrong, Today. . . .

I don't intend to spend a whole lot of time or energy on this, but I do think that the United States Supreme Court Bruesewitz vaccine courts case handed down today. . . was wrongly decided -- as a matter of pure statutory construction.

And, so -- at some later point, the Court will revisit this narrow question, to establish that Congress did not intend to give vaccine manufacturers an entirely "free pass", here.

My earlier backgrounder, on the oral arguments, is here. Oral argument mp3 streaming file here (including Justice Breyer's classic line: ". . .wait a sec, Wyeth -- you're saying when Congress wrote un-avoidable it meant avoidable?!" Breyer is right: Wyeth stood Congressional intent on its head).

In any event, here is some of "that wise Latina woman's reasoning," (Heh!) from Justice Sotomayor's dissenting opinion, today:

. . . .The majority’s reading suffers from an even more fundamental defect. If Congress intended to exempt vaccine manufacturers categorically from all design defect liability, it more logically would have provided: “No vaccine manufacturer shall be liable in a civil action for damages arising from a vaccine-related injury or death associated with the administration of a vaccine after October 1, 1988, if the vaccine was properly prepared and was accompanied by proper directions and warnings.” There would have been no need for Congress to include the additional 13 words “the injury or death resulted from side effects that were unavoidable even though.” See TRW Inc. v. Andrews, 534 U. S. 19, 31 (2001) (noting “cardinal principle of statutory construction that a statute ought, upon the whole, to be so construed that, if it can be prevented, no clause, sentence, or word shall be superfluous, void, or insignificant” (internal quotation marks omitted)). . . .

Look out, ahead -- about a half-decade -- for the Supremes' reversing opinion. For today, though -- this is mildly good news for Merck, and all other (low-margin) vaccine producers: it effectively is a hall pass. Henceforth, essentially no claim (short of manufacturers' fraud) will escape the vaccine court's bear-trap style limits on recovery.

Monday, February 21, 2011

Fred Hassan "HEARD About(!?)" Some Pending Layoffs -- At Organon? Um, WTF?!

A very earnest, if naïve (and star-struck) part-time writer at LifeScience apparently published the substance of his one-on-one conversation with Ex-Schering-Plough CEO Fred Hassan while I was off-the-grid. And so, forgive me for so-belatedly bringing you news of this February 8, 2011 "knee-pads required" interview.

It takes on renewed currency however, given that late last week, New Merck announced that there would be no intact buyer for the legacy Organon Netherlands R&D operations -- thus precipitating some 2,400 future firings. [The above right slide (click to enlarge) was undoubtedly jointly discussed, and vetted, prior to July 30, 2009 -- by then Schering (and Organon) CEO Hassan, Merck CEO Clark and the CEO of Sanofi. It plainly contemplated Organon-related "synergies" -- at least in the Animal Health portion of those businesses. Don't kid yourself -- Hassan was very-likely the chief architect of the Organon headcount reductions, in both Womens' Health and Animal Health. CEO Clark just executed the jointly-developed plan, in all likelihood.] Evidence?

Note that -- ever the oleaginous snake -- Mr. Hassan completely turns the focus, by deftly solicitous questionings of the author, about how the earlier Organon layoffs were handled, from the author's perspective -- thus deflecting all attentioon from his Hassan's central role in the decision. Hassan knew that it would so flatter the author, that he would forget to ask any "hard" questions of Hassan. Questions like (if you thought it could have been handled better) "What did you mean when you showed the slide at right, back in July 2009, to a largely-suppine Wall Street analysts audience?"

Note additionally that -- with the passace of a year and a half -- Mr. Hassan has (in his internal dialogue, at least) been able to remove all memory of his role in shaping the layoffs, prior to the November 3, 2009 final closing date of the bust-up transaction. In any event, here is a bit of the decidedly star-struck author's posting (do go read it all):

. . . .After Fred conducted his presentation, I had the opportunity to speak with him personally and it was anything but “vanilla”. You see, both Fred and I were employed by Schering-Plough (SP) prior to the merger with Merck. He at the highest level and me, well, not quite so high. I was a member of Organon Biosciences, which was purchased by SP. We discussed this acquisition, as well as the merger with Merck. I told him I was let go during the latter. He said he had heard about the layoff and began asking me questions about the process. He asked me if I knew why the decision was made to cut so many of the SP women’s healthcare sales team. I informed him that it appeared to be a result of Merck believing that the sales growth opportunity lied with Gardasil, a Merck product, and not Nuva Ring and Implanon, which were SP products. As a result, all of the Gardasil sales representatives were retained.

Imagine my surprise to see him shake his head and comment to me, very candidly, that he sees this happen all the time. The acquiring company thinks its products and people are superior to the ones being acquired. If that is the case then why are you acquiring the company? His final words were, “I think that could have been handled better.” I agree the process of who to keep and why during a major merger can always be improved. . . .

WAIT! -- Fred Hassan "sees" this "happen all the time"? No. . . he presides over, and engineers these occurences -- All. The. Time.

What an odd and misshapen little gnome Mr. Hassan has revealed himself to be. Note that the whole goal of Fast Fred's little diversion was to blame New Merck management for the Organon situation (one which he clearly created, and then simply endorsed decimating, with the stroke of a pen -- as the bust-up worked its way toward closure, in the Summer of 2009). Rather than acknowledge that he had only a scant idea of what he was doing, from a strategic-standpoint -- when he himself bought Organon just a few years earlier, in late 2008.

Astonishing -- or not so, I guess -- given this.

Friday, February 18, 2011

Novartis Gains Schering-Plough (Intervet) Fish Vaccine Patent Rights: Merial Antitrust Remedy?

It seems likely -- to me, at least -- that European antitrust authorities have required Merck to license this potential competitor to the Norvax® vaccine out to Novartis, to prevent a monopoly (likely to be created by simply shelving the new tech embodied in these legacy Intervet patents). Why else would Merck concede that it is putting a competitor in a position to put a knock on Norvax?

The below is a bit of the item from -- do go read it all:

. . . .Intervet/Schering-Plough has agreed to provide Novartis Animal Health with rights to develop new pancreas disease (PD) vaccines for fish based on its patents.

The agreement gives Novartis access to part of the company's patent portfolio for the disease, which has previously formed the basis for Intervet/Schering-Plough's own vaccine Norvax Compact PD, launched in 2008.

Novartis' product will provide an additional treatment option for salmon producers in the UK, Ireland and Norway to cope with PD, a complex and serious condition that has gained prominence in the last five years.

Hank Behrend, head of the global aquatic animal business for Intervet/Schering-Plough, conceded that Novartis' drug will be a competitor to Norvax, but maintained that its introduction is necessary to meet the needs of the sector. . . .

Do stay tuned, but negotiating deals like this one may explain the delayed closing date for the New Merial joint venture.

Thursday, February 17, 2011

MSDC Names Dr. John M. Amatruda Chairman Of Its Science Advisory Board

Another Merk-i-fied doctor is off to new horizons -- this time to a development company targeting future weight management drug candidates, per PR Newswires online:

. . . .Metabolic Solutions Development Company, a drug discovery and development company exploiting novel molecular targets to treat metabolic diseases, announced today that it has appointed John M. Amatruda, M.D. as chair of the company’s Science and Medical Advisory Board.

Amatruda was formerly vice president of clinical development for metabolism, atherosclerosis, and cardiovascular at Merck & Co., Inc., and served most recently as senior vice president and franchise head of Merck’s discovery research and drug development effort in diabetes and obesity.

"We are extremely pleased to have attracted a pharmaceutical research and development executive of Dr. Amatruda’s stature to chair our Science and Medical Advisory Board," said Stephen Benoit, MSDC’s chief executive officer. . . .

[Do stay tuned, but blogging will be spotty for a bit here.]

Wednesday, February 16, 2011

Merck Organon R&D In The Netherlands: No Deal By Deadline

It now seems likely that these operations will close altogether. Per Reuters reporting, overnight:

. . . .But on Wednesday [Merck] said it had not been able to come up with a feasible business plan for the Dutch-based R&D activities. . . .

Merck did not name the parties involved, but media reports have indicated that Aspen Pharmacare, Africa's biggest generic drug maker, Japan's Takeda, and Dutch bioscience firm Pantarhei had bid for parts of the business.

MSD-Organon is now looking at whether it can retain any of the R&D jobs within Merck. It said Organon's drugs and biologics business will remain an important part of the company. . . .

So, next up is an orderly process (via Dutch law) of Works Council meetings to close out the operations, and establish the long-term, multi-year severance packages for the workers. So the story of the last years of Schering-Plough in the Netherlands is one of very capable scientists, and very able line workers -- all ultimately failed by atrociously self-aggrandizing senior executives in Kenilworth, New Jersey: Hassan, Cox, Bertolini, Saunders, Sabatino and Koestler.

Truly sad. And largely avoidable -- this is plainly yet another Fred Hassan "hangover" item (see full updated table of these Hassan blunders, here). His eyes were obviously bigger than his brain, when he bought Organon (on behalf of Schering-Plough). He seemed to think size and scale, alone would be enough -- sans long term strategic fit.

What a monumental failure his tenure has turned out to be, no? But as he told us, worry not, for him -- ha was sure to take care of himself.

Monday, February 14, 2011

A Fosamax® Verdict For Merck -- In NJ State Court

This case is less meaningful, in the grand scheme of things, than any of the bellwethers. As a simple state court trial, it only decides Mrs. Rosenberg's Fosamax® claim -- not any of the related cases. Moreover, it will not carry much influence in the overall settlement posture (and discussion) of the some 1,200 MDL cases pending in the federal courts, at the moment.

Bloomberg has it thus:

. . . .Merck. . . said Monday it won a third lawsuit brought by a patient who said the company's former blockbuster osteoporosis drug Fosamax caused dental and jaw problems. . . .

The company faces more than a thousand lawsuits brought by patients who say they developed jaw and dental problems including osteonecrosis of the jaw — or rotting of the jawbone — after using Fosamax. . . .

On Monday the company said a jury in the Superior Court for Atlantic County, N.J., found that Fosamax did not cause the patient's dental and jaw problems. The patient used Fosamax from 1999 to 2006, and suffered jaw problems after having a tooth removed in December 2005. . . .

Next up: Secrest in March 2011, in the federal District Courts in Mnahattan, before Judge John Keenan.

Ex-Organon Exec's Firm -- Pantarhei -- To Acquire Merck's Dutch Operations?

Here is a bit of the Reuters reprint; but Pantarhei chief executive officer Coelingh Bennink -- a former Organon executive -- was not immediately available for comment (he is an ex-Schering-Plough guy, through the Organon to SP connection):

. . . .Pantarhei Bioscience director Herjan Coeling Bennink, told the paper that Pantarhie can make the proposal as a result of backing from international private equity investors.

No financial details were provided. The private equity investors were not named either.

Merck said in September it had postponed the closure of Organon's R&D activities in the Netherlands while it negotiated on potential alternatives, including a sale. . . .

We'll keep you posted. [Outage abated.]

Wednesday, February 9, 2011

There Will Be An "Outage" Here. . .

Through at least Sunday night, due to the death of the matriarch of the extended family. . .

Be excellent to one another.

Monday, February 7, 2011

Kahn Bros. Lightens Its Pharma Stakes, Generally -- Including Merck

Last fall, Kahn Brothers Group sold quite a bit of Merck, in order to buy more Pfizer -- tripling its stake in the world's largest public drugmaker.

Tonight however, the latest Kahn Brothers SEC Schedule 13F filing (as of 12.31.10) discloses that the house accelerated its unwinding of its Merck long position (sold off about twice as many shares as last quarter), but also sold off quite a bit of Pfizer and BMY as well, all prior to December 31, 2010 -- per Bloomberg wires:

. . . .Merck | 1,444,712 shares | 33,188 decrease. . .

Pfizer | 2,631,403 shares | 168,675 decrease. . .

Bristol-Myers Squibb | 1,687,185 shares | 66,587 decrease. . . .

Of course, this is only current as of Year-End 2010 -- but Kahn then likely got out at over $35, on most of those 33,000 Merck shares. Decidedly better than today's $32 and change, on the NYSE.

There Will Be At Least Two MORE Federal Court Fosamax® ONJ Cases Tried, In Late 2011

Late Friday, the very-able federal trial court Judge John F. Keenan (out of Manhattan's Southern District of New York), came to the conclusion that the remaining two bellwether cases pending before him would not adequately vet the issues in all of the subcategories of cases pending before him, on Fosamax® ONJ claims.

Specifically, he has yet to hear a case in which the alleged Fosamax ONJ injury arose after Merck's July 2005 FDA-encouraged label change (but was prescribed prior thereto); and he is looking to hear one in which the first prescription was after the label July 2005 change (ditto, the alleged injury). The two sides have until May 13, 2011 to get together and choose the next two.

From his Friday evening order, then:

. . . .Therefore, Court directs the Plaintiffs' Steering Committee and Merck to confer and to select, by April 15, 2011, two cases to be tried as additional bellwethers. One case must involve Fosamax use beginning before the July 2005 label change with a claimed onset of injury after July 2005 label change. The other case must involve commencement of Fosamax use and a claimed injury date to both post-date the 2005 label change.

In the event that the parties cannot agree on case select for either or both of the above categories, each party must propose, by letter to the Court, cases for each category of cases on which they have failed to agree. The Court will then randomly select one bellwether case from the six proposed cases, for each unresolved category and promptly inform the parties of its selection. . . .

That will bring the total to seven, in the federal courts. The first of the state court trials, Rosenberg v. Merck, et al., should be wrapping up late this week in Atlantic City, New Jersey. As ever, we'll keep you apprised.

Cowen & Co. Analyst Ups BMS; Lowers New Merck To "Neutral", From "Outperform"

Investors' Business Daily has it, this way:

. . .Bristol-Myers Squibb upgraded to Outperform from Neutral at Cowen and Company. . . .

Merck downgraded from Outperform to Neutral at Cowen and Company. . . .

I will say that when Merck dips closer to $32 (while sporting a probable fair value of around $35, post vorapaxar, but pre any J&J arbitration outcome) -- and Pfizer at around $19 (up from $16 a few weeks ago) -- these two (PFE and MRK) would be more equivalent value propositions, if each CEO had not articulated wildly differing visions of the 2011 to 2014 future for R&D budgets, at the respective companies. We shall, as ever, see.

Sunday, February 6, 2011

Merck's Merced Facility: "Erin Brockovich" Style Chromium 6 Lawsuit Redux?

Last week, as Ed Silverman's noted, a very able federal district court judge in central California, Judge Oliver W. Wanger, began hearing evidence about, among other matters, whether (as the plaintiffs allege) potentially damaging language about a clean-up plan written by a Merck consultant at Merced in the 1990s was ommitted from a final draft sent to local environmental authorities -- after some 22 years of Hexacarbonyl Chromium pollution had indisputably leached into the local water table.

Hexacarbonyl Chromium -- also known as Chromium 6 (3D molecular bond structure at right, click to enlarge) -- is a well-known carcinogen.

Here is a bit of the local Merced paper's March 2010 run-down (graphic at right derived from an original map posted courtesy the Merced, as updated by yours truly -- do go read it all:

. . . .In a case with undertones of "Erin Bro[c]kovich," some of the more than 2,000 people from the Beachwood neighborhood, who have been battling sickness and ill health, will soon witness the first phase of a lawsuit against the pharmaceutical giant Merck & Co.

The lawsuit alleges that a subsidiary of Merck polluted groundwater and soil in the area for years and caused sickness and death in the area.

Merck strongly denies the allegations.

A federal court [has begun hearing evidence]. . . in the first phase of the lawsuit against the $100 billion-plus company, as well as a group of other defendants. The first part of the lawsuit is meant to determine how much pollution was dumped on the site and how much were residents exposed to that pollution.

For the past four years, lawyers representing Beachwood residents have been preparing for a trial in federal court in Fresno against Merck. Specifically, the case involves allegations that the Baltimore Aircoil Co. (BAC), a subsidiary of Merck & Co., polluted the Beachwood area's soil and groundwater with Chromium 6, a carcinogen.

From 1969 to about 1991 a wood treatment process at the site leached the toxin into the soil, the suit alleges, and the company failed to notify residents of the danger. That pollution allegedly caused illness and death in the neighborhood. . . .

The jury was picked by Thursday afternoon; and opening arguments were completed on Friday. Testimony has begun in Case No. 07-388 (E. Dist., CA). We will of course keep you posted, and will report any verdict entered.