Thursday, March 31, 2011

Despite Merck's Boceprevir Presser(s), Piper Jaffray Is Keener Still, On Vertex's Next-Gen Hep C Prospects

Yep -- Whitehouse Station has been "blarting" all about (twice, in two days, no less!) its boceprevir HCV 60 percent response rate, over control [looking at telaprevir, Vertex's comparator number here -- is a solid 85 percent].

Meanwhile, looking out to the generation beyond 2011-2012, at EASL 2011, Vertex has quietly, simply, and quite politely, been mentioning its 90 percent SVR over a control-regimen. To be clear, that is the generation after 2011, the one that will compete with Hoffman LaRoche's dalcetrabib (click on second image, at right, below -- for that story), and Merck's anacetrabib -- sometime in 2016.

In any event, here's a bit from -- do go read it all:

. . . .In a note to clients, Piper Jaffray writes, "We are attending the European Association for the Study of Liver meeting in Berlin where Late Breaker posters are up. Abstract #1363 on Vertex' Phase II quad combo trial of Telaprevir + HCV non-nuc polymerase inhibitor VX-222 showed 90% response at week 12. We saw even more impressive combination data on Pharmasset's HCV nucleotide polymerase inhibitors and Bristol-Myers' NS5A inhibitor BMS-790052 + protease inhibitor BMS-650032. VRTX shares may trade lower today, but we remain buyers into the April 28th AdComm as Telaprevir maintains a 2+ year over competition. . . .

We may be only about seven weeks away from US FDA approval for the Vertex telaprevir Hep C therapy, now.

Do stay tuned, but even if Merck's boceprevir is only three weeks behind, I think the clinical data clearly favors Vertex, and J&J. And longer term, I think it is a tossup between Hoffman LaRoche and Vertex.

Wednesday, March 30, 2011

Pete Loftus -- On The $20.4 Million In Merck's 2010 Doctor Payments

Do go read all of Pete's fine piece -- but the most important omission -- in Merck's voluntary disclosure regimen is the fees paid to doctors by legacy Schering-Plough -- that might well double this figure, to over $40 million.
Here's a bit of the whole piece:

. . . .The Whitehouse Station, N.J., company posted the new data on payments to individual physicians on its website this week. The company previously disclosed data for the second half of 2009, when it paid $9.4 million to nearly 1,700 professionals.

The figures, however, don't include speaker programs tied to Schering-Plough, which Merck acquired in November 2009. Merck spokesman Ron Rogers said the work to prepare for the payment disclosures began before the Schering deal closed, and it's still integrating the Schering data.

Merck is among several big drug makers that have begun disclosing physician-payment data in recent years, amid efforts to be more transparent about how they do business. . . .

As i say - double that.

Merck's Proposed Jury Verdict Form, In Its California Chromium 6 Contamination Case

Below (in dark blue text) is the salient portion of Merck's proposed jury instruction -- as to the level of water contamination that would constitute a violation of applicable (California state) environmental emissions laws and regulations.

Note that, unfortunately for Merck, the standard in California is significantly more stringent than in many other jurisdictions (even though a good portion of the wood-treatment operations, and thus the alleged emissions of Chromium-6 into the local MErced, California water-table, occurred prior to the US EPA's establishement of federal SuperFund standards, and in fact, prior to the establishment of the federal EPA, itself). Wood was being treated at the Merced facility as early as 1969, according to public documents in the case file.

In water, a violation rate of 50 parts per billion -- for all chromium, hexavalent or otherwise -- is a very very tight filter. In short, I think it likely that more than 50 parts per billion reached water in the complaining residential subdivision, given that it is claimed that five times that concentration reached the convenience store's water supply, which it is stipulated is only about 600 feet beyond the Merck property line. The subdivision apparently begins about 1,300 feet beyond the Merck property line -- or just 700 feet beyond where (it is claimed that Chromium concentrations of 250 parts per billion were found).

In any event, here is the proposed instruction -- it is not yet clear that the very able U.S. District Judge, in teh Central District of California, Oliver W. Wanger, will actually give the instruction to the jury in this particular form -- but here it is:

. . . .You will be asked to decide whether plaintiffs have proved by a preponderance of the evidence whether any chemical from the former wood treating site ever reached a location where plaintiffs could have been exposed to such chemical at a concentration exceeding established regulatory standards or, if no such standard exists, at a concentration that is hazardous to human health. In deciding whether a concentration exceeded a regulatory standard with respect to drinking water and surface water, the applicable regulatory standard is:

Total chromium, including
hexavalent chromium:

50 micrograms per liter
(μg/L) or parts per

There are no regulatory standards applicable to hexavalent chromium or arsenic in air. If plaintiffs prove by a preponderance of the evidence that a concentration of hexavalent chromium or arsenic in air reached a location where plaintiffs could have been exposed to it, then you must determine whether that concentration is hazardous to human health.. . .

We will keep you posted.

Ex Schering-Plough Clinical Research EVP Named CMO of PTC Therapeutics

Regular readers will recall that New Merck inherited a $200 million outflow collaboration (for the development and commercialization of the compounds in the Legacy Schering-Plough/PTC Hepatitis C research and development program), back in November of 2009 -- when the bust-up first closed.

Many of the sharper readers will likewise recall the Celgene-Carrie Cox connections (she too is ex-Schering-Plough; Celgene has a $20 million equity investment in PTC Therapeutics -- and is collaborating on an oncology targets discovery program with PTC), but let's not overlook the Warburg Pincus overlaps (see below). In any event, here's a bit of the blurb, from the PR Newswires:

. . . .While at Schering-Plough, Dr. Spiegel was involved in the filing of over thirty New Drug Applications and interacted with regulatory authorities in the U.S. and globally on a regular basis, serving on the executive committees overseeing all research projects and drug licensing activities. Dr. Spiegel joined Schering-Plough in 1983 as Director, Clinical Research, progressing through clinical operations as Vice President of Clinical Research, Senior Vice President of Worldwide Clinical Research and then becoming Chief Medical Officer in 1998. He received his undergraduate degree, cum laude, from Yale University and his medical degree from the University of Pennsylvania. Dr. Spiegel continues to serve on the Board of Directors and Scientific Advisory Committees of a number of companies and is an Advisor at Warburg Pincus. . . .

Obviously, of course, Warburg is where the Ex-CEO of Schering-Plough, one "Fast" Fred Hassan, apparently still hangs his primary hat. . . Cozy. we will report additional intersections, as we uncover them, here. Do stay tuned.

UPDATED: Bob Bertonlini's new place is connected, too: PTC has an exclusive collaboration with Genzyme Corporation (where Bertolini chairs the Audit Committee of the Board of Directors), for the development and commercialization of ataluren (a PTC candidate). PTC will market ataluren in the United States and Canada, while Genzyme will commercialize the product in other regions of the world, we are reliably informed.

Tuesday, March 29, 2011

Merck's Merced Chromium 6 Water-Table Contamination Trial Wrapping Up Today Or Tomorrow

Per the Sacramento Bee's reporting, this morning -- closing arguments are underway, in a federal court, in the Eastern District of California (my prior backgrounder, on this issue, is here):

. . . .Closing arguments are set for Tuesday morning in a trial involving a former subsidiary of the pharmaceutical giant Merck accused of polluting groundwater, air and soil in a Merced subdivision for years.

About 2,000 residents of the subdivision claim the now-shuttered plant leaked hexavalent chromium, the cancer-causing chemical made famous in the movie "Erin Brockovich.

The plant used the chemicals to pressure-treat wood from 1969 to 1991. . . .

We will post any jury finding of liability/exonerating verdict here, as soon as it is available -- but that could possibly come before Friday, now.

Ed Silverman, On The State Of California's "Moral Suasion" & Merck's AIDS Drug Pricing

Pharmalot has a terrific piece out on the relatively high price of all AIDS drugs, inculing Merck's Isentress® -- and the accelerating efforts in California to make the durgs more affordable for people of limited means -- do go read it all (very solid stuff):

. . . .California State Controller John Chiang sent a letter to. . . . Merck [and nine other AIDS drugmakers]. . . .

In each case, Chiang wrote that California’s ADAP program has experienced a 257 percent increase in AIDS drug spending since 2000, more than three times the rate of client growth over this same period. The state is “faced with either racheting down access to ADAP or cutting other vital health services to offset the cost of ADAP,” he wrote the drugmakers, adding that supplemental agreements with several drugmakers expire this year, contributing to the financial pressures on the states.

“These increases not only put an undue burden on people seeking treatment, but place an unsustainable burden on states. California cannot afford to increase the budget for ADAP indefinitely in order to pay for higher drug prices. Nor can the state be put in the position of denying other essential health services in order to pay increasing drug costs. . . .

Indeed -- this is an important issue -- one which will garner increasing attention, as state health care budgets continue to constrict. Do stay tuned.

Wisconsin Collects From Schering-Plough/Warrick; Vows To "Fight On" With New Merck

Warrick Pharmaceuticals, a former Schering-Plough acquisition target, and current subsidiary of the renamed Schering-Plough (oddly enough, now called "Merck") -- has been accused by many states of overcharging state payers for albuterol. Massachusetts is among them (background post), seeking around $250 million -- now pending a damages order from the federal trial-level court in Boston. [Albuterol was sold under the brand name Proventil® by Warrick and Schering-Plough. it has long since gone generic.]

The more general tenor of each state's allegations (some 35 in total) is that Warrick, and then later Schering-Plough, published ficticious selling prices for the drug, so as to boost the level at which the state governments would reimburse the companies for providing the drug to patients participating in the Medicare/Medicaid (and similar state-based) systems.

Yesterday, the State governement of Wisconsin, historically pne of the smaller states for Warrick (by amount of revenue), settled with Schering-Plough and Warrick, but decided to continue litigating with New Merck (presumably on other drug pricing fraud claims). Here is a bit, from; do go read it all:

. . . .On Monday, Attorney General J.B. Van Hollen announced a settlement in which Merck & Co., Schering Corp. and Warrick Pharmaceuticals Corp. agreed to pay $3.7 million in restitution and $550,000 in costs and fees.

The two companies were bought by Merck. The state's lawsuit against Merck is still in litigation. . . .

Do stay tuned -- as we will report the outcome of the ongoing Wisconsin governmental litigation against Merck.

Sunday, March 27, 2011

Do Go See Ed, At Pharmalot, On The Potential ITC NuvaRing® Patent Spat

Ed Silverman, over at Pharmalot, has done an especially good job of providing the background materials and links -- do go read all of his -- but once again, a legacy Schering-Plough asset (here, the intellectual property embodied in the NuvaRing® hormonal device) is at the center of a patent dispute. Once again, I am given pause -- to wonder about whether Merck overpaid.

Here's a bit of Ed's on it, from Friday (whilst I was off the grid):

. . . .the US International Trade Commission has agreed to investigate a complaint hinging on a patent dispute involving different drugmakers. This time around, Femira Pharma accuses Merck and numerous retailers, including CVS Caremark Wal-Mart, of infringing on a patent because the drugmaker and pharmacies import or sell Merck’s NuvaRing vaginal ring birth control device. . . .

Femira argues its patent generally relates to a medicated intravaginal device, such as a vaginal ring, for transvaginal delivery of a medication to a woman’s uterus. Femira also maintins the drug delivery system described in its patent allows delivery in lower concentrations than those needed for systemic treatment and so offers a lower systemic concentration and fewer side effects. . . .

NuvaRing is one of the many products that Merck obtained as part of its acquisition of Schering-Plough and was the biggest seller in its portfolio of women’s health products. Last year, NuvaRing, which contains estrogen and progestin, generated $559 million in sales. . . .

Do stay tuned. . . .

Saturday, March 26, 2011

CEO Frazier In China, On China: 25% Of All Merck's Revenue By 2013?

I promised we'd cover any newsworthy remarks made by CEO Frazier in Bejing -- and here it is -- in video, from CNBC. See below; Merck projects that a quarter of its sales will come from CHina by 2013.

If we assume that the "Other Sales" line item, on page 137 (Revenues By Geographic Area) of the most recent SEC Form 10-K filed by Merck is primarily (or almost all) China sales, then, in 2010, Merck generated about 18.5 percent of its sales from China (and Australia/New Zealand). So, CEO Ken Frazier is expecting an about 25 percent increase, over two years, in Merck's China revenue-stream. That's significant, as Merck already employs over 4,500 people in three plants in China, so significant growth will be likely driven by increased sales penetration of mature drugs like Zocor, and the Hep B vaccine series -- as well as via a select-market, limited basis introduction of cutting edge therapies.

It is important to remember, however, that the gross margins on sales of all drugs in China will be much lower than in the EU and US. The state payor simply will not pay 65% or 70% margins -- so net, net -- this increase in sales may actually be a drag on overall gross margins at Merck. Here's the video (below), and below that is a bit of the CNBC story quote. Enjoy.

. . . .Merck expects more than a quarter of its revenue to come from China by 2013 as the government there carries out a plan to reform its healthcare system, according to Merck Chief Executive Kenneth Frazier. . . .

Merck began working with the Chinese government during the 1980s in the midst of a hepatitis B epidemic. The New Jersey-based pharmaceutical company donated vaccine at that time and built plants. The company now has three facilities and over 5,100 employees in China.

“Even now we work closely with the Chinese government to place our biggest drugs Zocor on their essential drug list," he said, adding that, "There’s a long-term partnership between Merck and the Chinese government. . . .

Do expect it to crimp overall margins, though.

Friday, March 25, 2011

The Sanofi-Merial-Merck/Intervet Termination Likely Means. . .

. . .The Sanofi-Merial-Merck/Intervet Animal Health JV Termination -- announced on Tuesday -- and now filed with the SEC, as a Form 8-K material development (full termination agreement, as an exhibit there), likely means that more legacy Schering-Plough/Intervet Animal Health employees will be able to keep their jobs, and careeers.

Net, net -- there will be no new jobs, but it is less likely that Intervet will slash heads by combining businesses on the scale once contemplated, under the New Merial Joint Venture Call Option (since abandoned). However, as Reuters points out, and our commenters note, smaller "bolt-on" acquisitions, in Animal Health, at Pfizer, Sanofi, Merck and Eli Lilly, among others -- should be expected, with those "bolted on" to be the most vulnerable to layoffs:

. . . .Sanofi-Aventis aims to expand its animal health business through small acquisitions, the drugmaker's head said after plans collapsed to create the world's top joint venture in that area with Merck. . . .

Sanofi and Merck on Tuesday dropped plans to merge Sanofi's pet-focused Merial unit, which they once jointly owned, with Merck's bigger, livestock-oriented Intervet business, a venture that would have had sales of some $5 billion. . . .

The companies blamed the complexity of selling assets to placate regulators, adding that they both remained committed to their animal health businesses, which for Sanofi generated annual 2010 sales of $2.6 billion.

"Bolt-ons are going to be easier" than large acquisitions, Viehbacher said, citing competition issues in the increasingly consolidating industry. . . .

Indeed -- a mildly positive sign for the rank and file; we will keep you posted.

Merck Loses Mandamus Petition In State Court Vioxx® Class Action Appeal

The Supreme Court of Kentucky has held that Merck is not entitled to the extraordinary relief of having a trial court determination set aside entirely, and summarily, even before a trial on the merits, in this state court Vioxx® class action suit. In sum, this is but one small example of my thesis that Merck's reserves, booked to date, will need to be augmented yet again, in the months and years to come (despite the $4.85 billion settled figure).

This still leaves open the more traditional routes of appeal, however. From the opinion, just published yesterday (courtesy

. . . .Appellant, Merck & Co., Inc., appeals from an order of the Court of Appeals denying its petition for a writ of mandamus against Appellee, Judge Stephen D. Combs, of the Pike Circuit Court. The underlying lawsuit, brought by the Real Party in Interest, James Ratliff, is a class action alleging that Merck concealed the dangerous side effects of the prescription pain medication marketed under the name "Vioxx". Merck now seeks an order directing the Pike Circuit Court to enter summary judgment in its favor or, alternatively, to vacate the court's order certifying a class action pursuant to CR 23.

Merck contends that it was entitled to summary judgment on Ratliff's claims. Alternatively, Merck contends that the class certified in this case is impermissible because Ratliff is an improper class representative, and because class issues do not predominate over individualized issues. For the reasons set forth below, we affirm the Court of Appeals. . . .

Ratliff, who took Vioxx from January of 2000 through early 2004, filed the present class action litigation in Pike Circuit Court on behalf of himself and all others similarly situated in Kentucky. As ultimately certified by the circuit court, the class is defined as being comprised "of all Kentucky residents who have purchased and taken Vioxx during the period of May 1999 through September 30, 2004, and who, upon recommendation and advice of the FDA and Merck have or will contact physicians to seek advice regarding their Vioxx use[.]".

As grounds for relief Ratliff pled: (1) violations of the Kentucky Consumer Protection Act; (2) fraudulent concealment and/or misrepresentation; (3) negligent and/or grossly negligent misrepresentation; and (4) unjust enrichment. As damages he sought compensatory damages for: (1) reimbursement of the cost of the drug itself; (2) reimbursement for the cost of the precautious medical exams; and (3) the loss of wages for lost work-time to receive the medical examinations. Collectively, his damages amount to about $350.00. He projects that other members of the putative class would experience similar damages.1 Merck opposed the motion to certify the class on the grounds that: (1) plaintiffs causes of action require proof of causation arid reliance, which would entail individualized inquiries that are unsuited for a class trial; (2) Ratliff is neither a typical nor adequate class representative; and (3) the proposed class definition is unworkable because there is no practical way to ascertain class membership. At the same time, Merck moved for summary judgment on Ratliff's claims on the grounds that: (1) Kentucky law does not allow product liability actions where the plaintiff was not injured by the product's alleged defect; (2) Ratliff has not suffered any actual economic loss because under his prescription drug plan he paid the exact same co-pay for Vioxx as he did for the prescription pain medication he would have taken in lieu of Vioxx; and (3) Ratliff lacks privity with Merck as required by Kentucky law to assert a claim under the Consumer Protection Act.

On April 2, 2010, the circuit court entered orders denying Merck's motion for summary judgment and certifying the class as described above. . . .

Now the Supreme Court of Kentucky has held that Merck must conduct a tradional appeal of the Pike ruling, in order to challenge the certification of the class, among other matters. This one will rage on for years to come.

Thursday, March 24, 2011

Merck Returns Betrixaban To Portola; Forefeits $50 Million Upfront Payment

This is probably net-net, good news for Merck, as it avoids perhaps $480 million of additional development costs -- in an already crowded field. [My July 2009 background on the original deal is here.]

Under the original Portola deal, Merck would have worked to develop betrixaban as an oral, once-daily blood thinner -- and, it was hoped, to start to supplant the older standard in this arena, wafarin. Merck had agreed to fund all the costs of development for Portola, as well as a $50 million upfront payment. That $50 million is gone; but there are other next-gen wafarin replacements that are likely to beat Portola's Factor Xa candidate to market.

Here's a bit of the BusinessWires story:

. . . .Portola Pharmaceuticals and Merck. . . today announced that Merck plans to return to Portola all rights for betrixaban, an investigational oral Factor Xa inhibitor anticoagulant being evaluated for the prevention of stroke in patients with atrial fibrillation (SPAF). This decision was made following a review of Merck's investigational portfolio. . . .

So ends another pipeline project for Merck.

How Long Until A New Grand Jury Indicts Ex-GSK Lawyer, In FDA Obstruction Case?

Yesterday, an ex-Glaxo internal lawyer won a (nominal) dismissal, without prejudice, of a grand jury indictment charging her with false statements to the FDA, and obstruction of justice. Ed Silverman, writing over at Pharmalot, has been covering this case very closely -- do go read all of his background. Are you up to speed, now? Good. Now. . .

While most headlines portray yesterday's opinion and order as a vindication of Ms. Stevens, I think this view is premature. In the longer run, I think it likely that the government will empanel a new grand jury, and simply correct its inadvertent mistake, in describing the doctrine of negating intent by good-faith reliance on advice of independent counsel, to the new grand jury. [What the government should have said appears below, in blue. When said as in blue below, the outcome will likely be the same: an indictment of Ms. Stevens, in my opinion.]

In any event, it is hard to see how a decision to exclude slides plainly covered by an FDA demand, by an officer, and high-ranking corporate attorney, to boot (thus an expert in what is required when one signs a document submitted to the FDA) -- from the response to the FDA (simply because another lawyer purportedly said it would be okay to do so) will pass muster.

Lawyers accept special obligations when they undertake to practice before the FDA, or the SEC. Knowingly omitting GSK promotional slides, when the request is for "all GSK promotional slides," is simply not cricket -- and thus, in my estimation, the government will be able to win a new indictment here. So, stay tuned -- as this case is still very-likely to send a chill through C-Suites -- up and down the PhRMA member roster.

Here's what should have been said, from Judge Roger W. Titus' opinion:

". . . .the defendant received advice from a lawyer and you may consider that evidence in deciding whether the defendant acted willfully and with knowledge. The mere fact that the defendant may have received legal advice does not, in itself, necessarily constitute a complete defense. Instead, you must ask yourselves whether the defendant honestly and in good faith sought the advice of a lawyer as to what she may lawfully do; whether she fully and honestly laid all the facts before her lawyer; and whether in good faith she honestly followed such advice, relying upon it and believing it to be correct. In short you should consider whether, in seeking and obtaining advice from a lawyer, the defendant intended that her acts shall be lawful. If she did so, it is the law that a defendant cannot be convicted of a crime which involves willful and unlawful intent, even if such advice were an inaccurate construction of the law. On the other hand, no woman can willfully and knowingly violate the law and excuse herself from the consequences of her conduct by pleading that she followed the advice of her lawyer. Whether the defendant acted in good faith for the purpose of seeking guidance as to the specific acts in this case, and whether she acted substantially in accordance with the advice received, are questions for you to determine. . . ."

1 Sand et al., ¶ 8.04 Instr. 8-4 (emphasis supplied). . . .

Do stay tuned, especially over at Pharmalot. I know I will.

The European Union Launches Its Version Of ClinicalTrials.Gov -- Huzzah!

This is a deeply gratifying development -- now almost all EU clinical trials (or at least those under which at least one of the sponsor's aims is to obtain an EMEA approval for some drug or indication) will be summarized, and tracked, online, in much the same fashion as the ClinicalTrials.Gov site does, here in the United States. Additionally, studies involving pediatric indications or pediatric drugs will be tracked, even if not EU-based and EMEA-driven. Excellent.

Do go take a look around at the shiny new EU site -- it is quite a leap forward. However, you'll need to contact Merck's EU sub, called MSD directly, if you'd like a complete list of all its EU-based clinical trials, in the aggregate, as that database search capbility is not yet available on the EU site. From the presser, then:

. . . .From today, all EU citizens will have access to information on the thousands of authorised pharmaceutical clinical trials that are underway in the EU. The aim of this official public register is to make clinical research on pharmaceuticals more transparent for patients and others and to avoid unnecessary duplication of clinical trials. Every year approximately 4000 clinical trials are authorised in the EU. Since most of them last 2 to 3 years, this means that around 10 000 trials are ongoing at any given time. . . .

The EU Clinical Trials Register website allows you to search for information on clinical trials in European Union (EU) member states and the European Economic Area (EEA) and clinical trials which are conducted outside the EU/EEA if they form part of a paediatric investigation plan (PIP). . . .

This is a very welcome addition to the pharma practicioners' online tool-kit -- it should make life much easier for all of us practicing in this arena.

Wednesday, March 23, 2011

New Merck Seen As "Responsive" -- In Biotech Deal-Doing: New Boston Consulting Survey

I would generally view these surveys with a modicum of skepticism, as the authors (here, The Boston Consulting Group) usually have a stake in the survey conclusions. But, given that they did widely poll biotech deal-doers, I think they are reporting a real effect, not just an imagined one. [Some of the tech involved in Merck's SmartCells deal is imaged at right -- click to read about it.] In any event, here is a bit of InVivo's reporting on it -- do go read it all:

. . . .Two companies that can pat themselves on the back? Roche and Merck & Co., who took home top honors as best partners in a recent survey of biotech execs published by the Boston Consulting Group. . . .

Ranked as a percentage of responders that agreed a company exhibited particular criteria, Roche struck gold in four categories, as the company is most associated with deal structure flexibility, executive leadership, alliance management, and manufacturing expertise. Merck led in five categories: responsiveness, BD/licensing group access, therapeutic areas of interest (tied with Novartis), control over development, and ‘develop and prosper,’ a metric related to post-deal success. . . .

Of course, one must remember that the survey's publisher is forever on the lookout for advisory roles on many such potential deal-makings -- so there is a powerful incentive to flatter all the counter-parties with the deepest pockets.

And Merck clearly has 'em. Even so, I still think the overall sense of the survey is accurate -- New Merck is a biotech deal-doing leader.

[I gave some additional credence to the survey, because it accurately captured one long rumored Pfizer-trait -- in deal-doing circles -- the propensity to overpay. That is spot on, from my experience (though to be fair -- much of it amounts to a rounding error, when one's balance sheet is the size of Pfizer's). As I say, do go read InVivo, this morning.]

Tuesday, March 22, 2011

That Hissing Sound You're Hearing, From Kenilworth, NJ. . .

. . .Is more of the supposed New Merck "synergy/headcount reduction" savings (from the Schering-Plough bust up) -- escaping.

The plan was -- under Sabatino and Kuhlik -- that most of the headcount expense associated with the Schering-Plough/Intervet Animal Health businesses would ultimately be off-loaded to the New Merial joint venture -- a 50-50 affair with Sanofi-Aventis. Delever the expenses, at New Merck, and ramp up a net revenue stream, out of the 50-50 New Merial JV. That was the idea. It is now clear, that is not going to transpire (I repeatedly said it seemed dubious from a regulatory perspective, even then -- given the market power these two players would wield, when combined.).

Accordingly, New Merck is going to have to operate the old Intervet Animal Health assets, and accept the cost (overhead, R&D and headcount) of the same. This is likely yet another reason CEO Frazier withdrew guidance for 2011-2012, a couple of months ago. But make no mistake, this decreases the expected savings from the Schering-Plough deal, and in a material fashion, too.

Here's a bit of the Reuters reporting this morning:

. . . .The move sets back the French and U.S. drugmakers' plans to achieve economies of scale in the consolidating animal care industry, and comes a month after they delayed the long-running deal's closing by another six months.

It is also a blow to companies that had hoped to snap up assets with about $500 million in annual revenue that the pair would have had to sell to clear regulatory hurdles. . . .

Yet another Hassan-Sabatino headache, handed to Merck, now over a year and a half post closing. Picture much excited hand waiving, and a "we'll be able to figure it out in 2010!" repeatedly chanted, out of the law department in Kenilworth, during the summer of 2009 -- as the first step of the Merial JV took shape. Sheesh.

"Monopoly Powers" -- At 30% Of World Market -- Fell Proposed Merck/Sanofi Vet Med Deal

Last week, when Lilly announced that it would buy some J&J Animal Health assets, I suspected that the Merial deal was in trouble (as Lilly was thought to be one of the buyers for some of the to be divested Merck Animal Health assets) -- and I said so.

I just underestimated how much trouble it ws in. [This is also rather embarrassing for Morgan Stanley, the bank retained to sell off the perhaps $1 billion to $2 billion of Merck/Sanofi offending assets -- they simply couldn't execute the transaction -- couldn't get the deals done.]

When one undertakes to control about a third of the world's veterinary medicines business, one simply begs the anti-trust regulators to step in. And it seems the DoJ/FTC and ECC, among others, did.

Here's a bit of the Whitehouse Station presser, of this morning:

. . . .Since the initial announcement about the intended combination on March 9, 2010, both companies have worked diligently to create the proposed animal health joint venture, including submitting requests for the required antitrust reviews. The companies are discontinuing their agreement primarily because of the increasing complexity of implementing the proposed transaction, both in terms of the nature and extent of the anticipated divestitures and the length of time necessary for the worldwide regulatory review process. Merck and sanofi-aventis mutually determined that ending their plan is in the best interests of both companies and their respective shareholders, as well as the employees of Merial and Intervet/Schering Plough. . . .

Merck's Intervet/Schering-Plough is a global leader in the research, development, manufacturing and sale of veterinary medicines and generated sales of US $ 2.9 billion in 2010. Merck remains firmly committed to animal health and intends to capitalize on Intervet/Schering-Plough's broad and innovative portfolio going forward.

As a result of termination, both Merial and Intervet/Schering-Plough will continue to operate independently. The termination of the agreement is without penalty to either party and each party is responsible for its own expenses. . . .

Well, it isn't like I didn't warn that this would be a real problem, back in November of 2009, and then again in March of 2010 -- when Sanofi exercised its option.

Monday, March 21, 2011

Medco II -- On The Villalobos, To Merck/Medco, To CalPERS Connections -- From Pharmalot

Ed has a whole slurry of fascinating additional detail, this morning (on a story we mentioned over the weekend) -- including the 75-page (0.9 Mb PDF file here) Steptoe & Johnson report -- which is devastating in its omissions (primarily, the ommissions of any on the record exoneration, of the principal involved parties).

Do go read all of Ed Silverman's reporting -- but here is a bit of it:

. . . .Medco, which administers pharmacy benefits and runs a mail-order pharmacy, had lost a bid to renew that contract and hoped to win CaLPERS business in 2006. The PBM, in fact, did win the three-year, $26-million contract, but maintains Villalobos was not hired for that purpose. However, he was subsequently given an annual contract ending in 2009 that paid him $20,00 a month, which Medco says was “largely unrelated to CalPERS,” according to its filing.

The CalPERS investigation, though, notes that Villalobos “had no prior PBM counseling experience.” And Snow met with Villalobos and Fred Buenrostro, who was the CaLPERS ceo at the time, at Villalobos’ home in Lake Tahoe in early 2004. After that meeting, Medco hired Villalobos, according to the report, which was prepared by the Steptoe & Johnson law firm and Navigant Consulting. Several months later, Snow met with Villalobos, Buenrostro and three CalPERS board members: Charles Valdes, Kurato Shimada and Robert Carlson. . . .

This one sure seems headed toward indictments, based on a reading of the 75 page report.

Sunday, March 20, 2011

Merck CEO To Speak In Beijing Tuesday -- On Emerging Markets

From PR Newswires:

. . . .Kenneth C. Frazier, CEO of Merck (known as MSD outside the United States and Canada), will give a keynote speech at the 2nd Annual China Healthcare Investment Conference to be held from March 22-24, 2011 in Beijing. Mr. Frazier's attendance is further testament to the significance of China as a key growth platform for leading global pharmaceutical companies like Merck.

Alongside Mr. Frazier, over 40 other well recognized senior healthcare executives including global and local CEOs, leading public and private investors and healthcare government officials will be speaking at this premier annual event. . . .

We will report anything truly newsworthy that he has to say there.

More, From Merck -- On Vorapaxar Travails. . . .

This was from the official Thompson's transcript of last week's Barclays Miami conference (see last page of that PDF file):

. . . .Q.: Tony Butler | Barclays Capital | Analyst

Thanks very much. Just a question on Vorapaxar if I may. If you actually think about what you do know, is -- because the [blind] must have been [broken] by the DSMB, the question becomes are statistics then therefore irrelevant for 2P? That's number one. Number two, what would be the best outcome that you could arrive that based upon TRACER and 2P today? Would that be a subsequent new trial in non-stroke patients or something else?

A.: Luciano Rossetti | Merck & Co Inc | SVP of Global Scientific Strategy

Tony, it's very, very difficult for me to speculate at this stage because truly what we know from the DSMB is so minimal. Remember the mission of the DSMB is the protection of the safety of the patients within the trial, that you can argue that this is obviously the mission for everyone involved. But there is a component of also an interest in finding out the answer, because that benefits the larger population.

But that is not the DSMB mission. The DSMB mission is to protect the safety of the patients within the trial. So overall what I can tell you is the DSMB has recommended that we continue dosing about 75% plus of the patients in TRA 2P. That will take a little
bit longer time but we really look forward to looking at that data.

We also look forward to look at the data of TRACER, because as I mentioned, we have achieved the number of events to make a scientific determination of the trial. And so we're going to examine those data. We have no knowledge of what the data is going to tell us in terms of safety and efficacy or subgroup analysis. And only after that I can start to have a cogent debate with you about next steps. . . .

We'll check in on this, from time to time.

Sac Bee, On CalPERS -- And Merck's Stint Controlling Medco -- The Scandal Allegations Roll On. . . And On.

The Sacramento Bee has done an excellent job of covering this public corruption story for years now. Lately, one facet of the [alleged bribes to] Villalobos [to curry favor, for certain investments by CalPERS] matter to sudenly sparkle dazzlingly -- in the Bee's bright sunlight -- is the connection between Villalobos and Merck-Medco. Apparently, while receiving around $4 million to consult on the audit of a prior Cal contract for prescription benefits management, Alfred JR Villalobos was being paid an additional $20,000 per month continuously through 2009 (or about a quarter-million dollars a year) from Medco, for "largely non-CalPERS related" contract advice. Really? As they say, where there's smoke -- often there is fire, too.

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

. . . .Medco also said it has just received a subpoena from the SEC. . . .

CalPERS said Wednesday it won't renew its contract with Medco, which administers drug benefits to 300,000 state workers and retirees. Medco was lead finalist for the new pact.

The move followed disclosures by CalPERS that Villalobos was hired after he met with Medco Chief Executive David Snow and Fred Buenrosto, the pension fund's CEO at the time. He also met later with Kurato Shimada, Charles Valdes and the late Robert Carlson, who were CalPERS board members, according to a report written for the fund by attorney Philip Khinda.

Medco paid Villalobos to help win the contract, Khinda said, and made the final $1 million payment the day it won the deal. . . .

[Medco was] then a subsidiary of Merck & Co. and known as Merck-Medco – was also dealing with several class-action suits. Sources familiar with the litigation said the suits involved some of the same issues brought up in CalPERS' audit.

The litigation was settled with Merck-Medco paying over $42 million. CalPERS wasn't part of the litigation.

Meanwhile, a retired state worker has sued Medco, Buenrostro, Shimada and Valdes, saying the dealings with Villalobos led to CalPERS members being overcharged for drugs.

State workers and retirees "have paid excessive amounts of money for their medications purchased through Medco," says the suit filed in Sacramento Superior Court. It was filed by Michael Desrys, a retired Caltrans worker, and seeks class-action status. . . .

We will keep you informed from time to time.