Will Merck Use "Fuzzy" R & D Expense Rates -- To Improve EPS In 2011 and 2012?

I said yesterday that it was possible that some of New Merck's "beat" on Q1 2011 earnings was not a pure fundamental sales and gross margin improvement. That seems true, given these comments on the call, courtesy of SeekingAlpha:

. . . .Q: Tim Anderson -- Sanford C. Bernstein & Co., Inc.

My guess is you're going to resist answering this, but I'm hoping you can share your thoughts. On R&D spending, if you could potentially keep it flat or slightly down in 2011, is it possible that R&D spend might contract further beyond 2011? Just looking for a directional answer on this. . . .

A: Kenneth Frazier -- CEO, Merck & Co., Inc.

Yes. On the R&D question, I would say that as I've tried to say all along, the R&D spending that you see at this time in Merck is a function of the assets that we have at various stages of development in the pipeline. I don't think you should consider it to be a number going forward. I think it will all depend on what we have. We're pleased to have the assets that we have in late-stage development inside our company. And going forward, we are going to be looking for ways to produce efficiencies in our R&D, including prioritization decisions. We've been reducing the number of R&D sites. So we are committed to ensuring that whatever we spend on R&D going forward is about quality, not about quantity. So we have no dogma about an $8 billion spend in R&D. It's really about making sure that we maximize the assets because we're committed to growth long term, and we believe that R&D is the predominant driver of long-term growth in this industry. . . .

So, if R&D spending will be moved back and forth, quarter by quarter, there is a real probability that any earnings "beats" will come from below the sales and gross margin lines (by staging the indirect expenses, like R&D, that do not come out at the "cost of sales" line).

So, were I you, given that the R&D spending goal for 2011 just dropped from $8.5 billion to something south of $8 billion (said another way, adding about 16 cents a share, at the EPS line -- on the 3.08 billion shares outstanding -- and more like 18 cents a share, if Merck quickly repurchases all of the $6.4 billion of stock it is suddenly authorized to repurchase). . . I'd take Merck's generally good news of yesterday with some significant salt. It is not going to be primarily a fundamental improvement in gross margins. It is going to be R&D expense savings, in part -- and thus not clearly sustainable, longer term.

A Lone "Wolf" Descends -- Declares Telaprevir the Presumptive Winner

A long-time lurking friend to this space, "Wolf", lopes down from above timberline, and offers what I regard as spot on analysis of the boceprevir v. telaprevir relative commercial success debate, thus (from our comment box):

. . . .The necessity to use EPO in many boceprevir treated patients not only complicates the therapy but significantly and unnecessarily increases the cost of therapy. In most Western countries, majority of HCV is treated by community-based gastroenterologists which do not typically use EPO in their clinical practice.

One must also remember that the use of EPO to control boceprevir and/or ribavirin-induced anemia is an OFF LABEL use of EPO (the last time I looked) which further complicates both access and treatment. I suspect most community-based physicians would be reluctant to undertake this liability especially given the likely availability of telaprevir which is not plagued with this issue.

Barring a catastrophic event or major Vertex blunder, its looking more and more likely that Vertex will emerge the winner post-commercialization.

Wolf

April 29, 2011 11:44 PM. . . .

Exactly. Our thanks go out again, to Wolf. It seems that once the immediate launch gyrations settle into recurring prescribing trends, we'll see Vertex with about 75 percent to 80 percent US market share, and the balance -- some 20 to 25 percent -- in New Merck's coffers.

Once again, a disappointing legacy Schering-Plough "also ran" outcome, thanks to Fred.

Now, "It's All About The Label": Vertex's Telaprevir Has A Clear, Easy FDA Label Path

I just saw a great comment, by Iron2_2000 -- over on the Yahoo stock chatboard, on this very topic -- thus:

. . . .I see only one complicated label forthcoming [Merck's Boceprevir].

During the boceprevir review on Tuesday I heard phrases like “complicated label” and “underpowered” or "not really there" (relating to data for 24 week treatment duration for partial responders and relapsers). [All from FDA Advisory Panel members.]

During the telaprevir review on Wednesday I heard phrases like “complete and easy to understand” relating to trial design and results. I also heard phrases like “need for education” related to the amelioration of the rash side effect.

There is little that can be done (except for perhaps prayer) to make up for Schering-Plough/Merck’s flawed clinical trial design which will likely lead to a complicated label.

[Conversely,] there is much that can be done about educating physicians and patients in the management of rash during the use of telaprevir (indeed that has been done since telaprevir’s P3 dropout rate was 0.8%).

Bottom line – Vertex is better poised with more than a year’s supply of telaprevir stockpiled to sweep up the population of patients previously treated with SOC. Their label will indicate either a 24 week therapy (for partial responders/relapsers) or potentially longer therapy (for null responders). These are the patients that have been sitting on the sideline watching and waiting, following the story closely. These are people who have already experienced the side effects of SOC. I think for the most part that they will opt for telaprevir’s 24 week therapy now instead of waiting for Merck to get a label change later for a less than 48 week therapy.

I also don’t think reimbursement for erythroprotein will be clear-cut, which is a further potential liability that could appear on boceprevir’s label. So yes, Merck might have an advantage in terms of having a well developed marketing capability. They will need it to grab the 20% of the early Hep C market that will come their way under their most optimistic scenario. I think it will be more like 10-15%. Again, much will depend on the label. . . .

On Wednesday, the FDA Advisory Panel, voting 18-0, absolutely gushed about how well-designed, and executed, Vertex's clinical data appeared. That alone will make for clearer and easier label copy, after FDA vetting (when compared to legacy Schering-Plough's ill-designed trials, which have now led to complicated, confusing labeling). It's all in doing the "little things" right (and doing so, every time), guys.

In passing, I'll note that Merck posted good results this morning, nominally beating, while taking the $500 million J&J charge (among other ongoing write-downs) -- so it is hard to tell whether it was all a pure fundamental sales and gross margin beat -- or, in part, some financially engineered upside, by moving ongoing expense numbers into one-time charge buckets. Unfortunately, I don't have time today, to sort it all out, line by line -- will do so over the weekend. Be excellent to one another.

Vertex Halted On NASDAQ Today -- Look For It To Gap Up, Tomorrow

Some times -- okay, most times, a halt signals bad news. Not so today. This halt is designed to protect the careful longer term holders of Vertex, I am fairly certain.

There are always market manipulators out there, looking to pump or dump on one or two small comments made -- during the course of the FDA's Advisory Committee proceedings. And there will be some of those made, today -- in Maryland. This halt will largely blunt those attempts. (And so, trading in VRTX puts and calls is where these folks will now try to make a quick buck today.) Don't be fooled. VRTX is very likely to gap up when it repoens on the NASDAQ.

Per Associated Business Wires:

. . . .Vertex Pharmaceuticals Incorporated announced that NASDAQ today halted trading of the company's common stock. The United States Food and Drug Administration’s (FDA) Antiviral Drugs Advisory Committee meets today in Silver Spring, MD to review the New Drug Application (NDA) for telaprevir.

The NDA for telaprevir was granted Priority Review by the FDA, and the FDA is expected to make a decision on the approval of telaprevir by May 23, 2011 under the Prescription Drug User Fee Act (PDUFA). The NDA includes data from three registration studies, ADVANCE, ILLUMINATE and REALIZE, which evaluated telaprevir in combination with pegylated-interferon and ribavirin in people who were not treated previously and in the three major subgroups of people who were treated previously but who were not cured with currently available medicines – relapsers, partial responders and null responders. . . .

Clearly this preserves a more orderly trading market for the shares. It is a wise move by the NASDAQ board of market-makers.

Merck's $5 Billion Stock Buyback: "Whitehouse Station has no higher use for that capital"?

As we await the Q1 2011 earnings webcast in two days, Merck is presenting before an FDA advisory committee -- about approving boceprevir (Vertex's telaprevir is to be presented tomorrow); Merck's North Carolina operations are adding 150 jobs -- as the manufacturing operations expand away from the West Point, PA facility. . . and Merck said this morning it will buy back an additional $5 billion of its stock over the next few years -- bringing the total outstanding buyback authority to $6.4 billion. See Reuters, on it:

. . . .Merck said on Wednesday it plans to buy back up to $5 billion in shares, bringing its total share buyback program to $6.4 billion.

The Whitehouse Station, New Jersey-based drugmaker said the stock purchase has no time limit and will be made on the open market, in block transactions or privately negotiated transactions. . . .

Disappointing.

I've long felt that vast buybacks are in some ways an admission of defeat by management. How so?

Well, by using cash to buy stock back, that cash will then definitively only generate a return that matches the average of all bets the company has made. It is afterall, simply betting on the company. In smaller proportions, this betting can be opportunistic. At $5.4 billion, it seems to suggest that Merck can't think of any investment which would generate a return ABOVE the company average -- so it throws in the towel, and buys back its own stock, hoping that the scarcity of shares in the float will drive up stock prices at least marginally, by soaking up some supply.

Why isn't that same $6.4 billion slated to build new plants, or launch new products, I ask.

I answer myself simply by saying -- there must not be many new products of size that need new plants. Similarly (and this is plainly a false premise), Merck must think there aren't other companies to be had, at a reasonable price, that would return more than the company's internal hurdle rate for equity capital.

We know -- from scanning tha deal sheets, that cannot be true.

So my advice to CEO Ken Frazier, and to Merck? Get acquisitive. And do so now, in size. You've $5 billion to toss around. Go make some bets. Viz (as of December 2010 -- just a few examples of companies with higher projected near term returns on capital):


That was from Christmas time 2010 -- sort of prescient, no? To be clear, I am not advocating the outright purchase by Merck of any of these specific companies (many of them are now led by ex-Schering-Plough executives, so that should be fair warning!). But there are hundreds, if not thousands, like them out there. Take a chance, Merck.

[Of course, the bit of H.L. Mencken in me also thinks it might well be that the buyback announcement, and the 150 new jobs in North Carolina, are PR hedges against a finding at FDA that suggests boceprevir needs an additional Phase III study before approval, or that come tomorrow, Vertex's telaprevir is shown to be the plainly superior Hep C candidate.]

Vertex's Clinical Data Better Than Initially Expected: FDA Advisory Panel

Vertex shares showed the love, from the FDA Advisory Panel -- per Reuters:

. . . .Vertex shares rose 12 percent to their highest level in a decade after comments from Food and Drug Administration staff on Tuesday that analysts said favored the medicine's approval.

Shares of Merck, whose rival hepatitis C treatment also faces an FDA panel's review this week, rose 2.2 percent. . . .

Vertex's telaprevir eliminated the hepatitis C virus in 79 percent of newly treated patients, FDA reviewers said. That was higher than the 75 percent Vertex reported earlier because the FDA used a different cure rate calculation. . . .

Tomorrow, and Thursday, will prove to be very enlightening -- as we see the panel's "Body English". . . . here is some of it, in the questions the committee will ponder, as it reviews Telaprevir.

Merck's Boceprevir To Run Into A Wrinkle At FDA Advisory Panel?

It seems that the FDA Advisory Panel is concerned about the legacy Schering-Plough candidate's side effect profile. The preliminary drafts of agenda, and questions have been released by the FDA, this morning. And here's the first question: ". . . .1. Please comment on the safety of boceprevir in patients with chronic hepatitis C genotype 1, focusing mainly on the hematological effects of boceprevir in combination with pegylated interferon and ribavirin. . . ." In plain(er) English, that question asks about anemeia -- and the rates of the same, as seen in some of those patients, on the boceprevir combination therapy.

This, per Reuters reporting:

. . . .A main issue for discussion is the increase in anemia in patients treated with boceprevir, Food and Drug Administration staff said in a summary prepared for an advisory panel that will review the drug on Wednesday.

Another "potential safety signal" is a higher number of patients who reported psychiatric symptoms such as suicidal and homicidal thoughts, the FDA reviewers said. But they added it was "difficult to make any meaningful clinical conclusions" about the cases.

FDA staff said they generally agreed with Merck's assessment that boceprevir was effective in treating hepatitis C, a disease that destroys the liver. . . .

The 26th and 27 th will be big days for Merck and Vertex -- but proportionately bigger for Vertex, relative to its overall size. Vertex expects taht its Telaprevir will come through the panel with flying colors. We'll keep a weather eye on it all -- in fact, we'll watch the live webcast from FDA's website -- and you can too, by clicking that link on the morning of the 27th (Adobe Connect required).

Vertex's analogous materials should be available at the FDA web-window, tomorrow morning.

The New York Times' Natasha Singer, On Arguments Over Selling Doctors' Data. . . .

Come Tuesday, a case that could largely decide the financial viability/fate of companies like IMS Health will be argued before the highest court in the land.

At issue is whether states, like Vermont, may constitutionally exercise their police powers, to prevent companies like IMS from selling data streams about individual doctors' prescribing decisions (albeit aggregated over many patients, and stripped of patient identifying information). Obviously, pharmaceutical and life science concerns want access to the data (at least in part) to more effectively woo the higher-prescribers.

Equally obviously, patients may be unaware that their doctor is being so wooed (and/or so-highly prescribing), as just such a high-roller -- and thus may at least arguably be conflicted, when making drug decisions for a given patients.

Do go read all of what Ms. Singer has written, in the New York Times -- but here's a bit:

. . . .On Tuesday, the Supreme Court will hear arguments in a case, Sorrell v. IMS Health, that tests whether Vermont’s prescription confidentiality law violates the free speech protections of the First Amendment.

The case is being closely watched not only by drug makers and data collection firms, but also by health regulators, doctors and consumer advocates who say the decision will have profound implications for doctors’ control over their prescription histories, and for information privacy, medical decision-making and health care costs.

Vermont’s attorney general, William H. Sorrell, petitioned the court to review the case after three leading data collection firms including IMS Health, a health information company, and the Pharmaceutical Research and Manufacturers of America, a drug industry trade group, challenged the state statute. Although the federal district court in Vermont originally upheld the law, an appellate court reversed the decision last November.

The federal government, the attorneys general of several dozen states, AARP, professional medical associations, privacy groups and the New England Journal of Medicine have filed briefs in support of Vermont’s law. The National Association of Chain Drugstores, the Association of National Advertisers and news organizations like Bloomberg and The Associated Press have filed briefs aligning themselves with the data firms.

The concern over marketing based on doctor-specific prescription records revolves around the argument that it makes commercial use of private health treatment decisions — initiated in nonpublic consultations between doctor and patient, and completed in government-regulated transactions with pharmacists. . . .

We will keep you informed about this, as it is a certainty the Whitehouse Station will be monitoring these arguments -- in real time fashion. Literally billions are at stake here, for pharmaceuticals, and life sciences, companies.

Merck and Sanofi To Conduct Phase III Pediatric Vaccine Study

This per a pharmaceutical trade magazine's online aggregator:

. . . .The vaccine is a combination of DTaP5-IPV-Hib- HepB; Diphtheria and Tetanus Toxoids and Acellular Pertussis Adsorbed, Inactivated Poliovirus, Haemophilus b Conjugate, and Hepatitis B Vaccine.

The Phase III clinical study will begin in the US with a randomized, open-label, active-comparator controlled clinical trial involving about 1,440 infants at multiple sites.

The primary trial objectives are to assess the safety and immunogenicity of the investigational hexavalent combination vaccine when given at 2, 4, and 6 months of age with Prevnar 13TM Pneumococcal 13-valent Conjugate Vaccine (Diphtheria CRM197 Protein) and ROTATEQ (Rotavirus Vaccine, Live, Oral, Pentavalent) while the clinical program is expected to begin in Europe this year.

The company's Phase IIb clinical trial involved 459 children that assessed the safety and immunogenicity of the investigational combination vaccine. . . .

We'll keep you posted -- when outcomes data are made availbale.

Merck's Big Research Bet: Business Week

Take a look -- from Business Week:

. . . .The company faces generic competition in two years to drugs that generate a quarter of its $46 billion in annual sales, including its top-selling drug, asthma treatment Singulair. Merck's best hopes to replace those drugs years away from hitting the market.

When Frazier announced the $8.5 billion research bet, Merck shares fell 2.7 percent. That's because research dollars spent today can take a decade to turn profits. Development of a new drug can cost as much as $1.3 billion. The cost is particularly high for the cholesterol pills, diabetes medicines, and vaccines that distinguish Merck's pipeline because they may be widely used and require more rigorous testing. The potential payoff, though, can be huge. Pfizer's cholesterol-lowering Lipitor, the world's best-selling drug, generated $10.7 billion in sales last year. "As CEO, I have the responsibility to make sure we make smart bets," says Frazier. . . .

After taking a $1.7 billion write-down on vorapaxar, Frazier also withdrew Merck's 2013 earnings target, saying the company wouldn't be able to meet that forecast without shortchanging investments in researchsomething he's unwilling to do. Merck's compound with the most profit potential, a cholesterol pill called anacetrapib, remains on track. The drug raised so-called good cholesterol by an unprecedented 138 percent and reduced bad levels by 40 percent in a late-stage study released in November, positioning it as a possible successor to Lipitor. Results from final tests are years away. Explains Frazier: "If you're going to be in the business of breakthrough research, you have to accept that the timing can be uncertain and the risks are large. . . ."

Will Merck's Q1 2011 Earnings Call Go As Well As J&J's Did?

In nine days, Merck is set to report on first quarter 2011 results. We'll live blog it. I will be keenly interested in whether the macro- trends that allowed J&J to up its outlook for the full year 2011 -- and thus drove J&J's shares up 3.5 percent on the NYSE yesterday, alone -- will shine through, in Merck's Q1 2011 results.

Without the time to really do the diligence on J&J's results, I can only suspect that a fair amount of the J&J 2011 halo/improvement was generated by the very favorable revenue-and-margin enhancements it will start to receive in July 2011 -- as Merck surrenders parts of the Remicade/Simponi franchise -- under the "Schering-Plough's change of control" transaction settlement agreement. Which means Merck may not show such an upside surprise. We shall see. Here is the Whitehouse Station presser, and details:

. . . .Investors, journalists and the general public may access a live audio webcast of the call on Merck's website at http://www.merck.com/investors/events-and-presentations/home.html. Software needed to listen to the webcast is available on the corporate website and should be downloaded prior to the beginning of the webcast. A replay of the webcast will be available at approximately 11 a.m. EDT on April 29 and will remain on the website for 12 months. The quarter's sales and earnings news release and supplemental financial disclosures also will be available in the Newsroom and Investor sections of the company's website at www.merck.com.

Members of the media are invited to monitor the call by dialing (706) 758-9928 or (800) 399-7917 and use ID code number 51049889. Journalists who wish to ask questions are requested to contact a member of Merck's Media Relations team at the conclusion of the call. . . .

Does this mean that there will be no live Q&A session, on the call? I am unsure. [Certainly the applicable SEC rules don't require that a live broadcast of the analysts' follow-up questions and commentary be included in real time. It would be odd not to do so, just the same.]

Do check back -- but I think Merck will post solid results -- just nothing world-beating.

Jim Edwards: On Fire, About Merck. . . Do Go See. . .

On NuvaRing marketing junkets in Estonia. . a, and on Merck's Ex-CEO's coming pension payment levels -- do go read them both, but here's a bit:

. . . .New CEO Ken Frazier’s compensation is much more modest than Clark’s. He made only $9.4 million last year. But Clark’s impending retirement — he turned 65 on March 7 — will likely trigger another eye-popping payout. He has accumulated pension payments of $33.3 million and deferred compensation of $15.8 million. . . .

Do go read him.

Private Equity Firm Dilutes Merck Capital Ventures' Stake In ImpactRx

Here's the news -- Merck Capital Ventures still owns a stake (now diluted by Symphony Technologies Group) in ImpactRx, a privately-held Mt. Laurel, NJ aggregator and analyzer of doctors' prescription-writing patterns, per last night's Modern Physician.com:

. . . .Private-equity firm Symphony Technology Group, Palo Alto, Calif., has acquired a majority interest in ImpactRx, a provider of systems to track the effects of pharmaceutical promotion on doctors' prescribing behaviors, according to an ImpactRx news release. Financial terms of the deal were not disclosed.

ImpactRx will operate as an independent Symphony Technology portfolio company, according to the release, and Merck Capital Ventures, the venture-capital arm of Merck & Co., will maintain its investment in the Mount Laurel, N.J.-based company. Also, ImpactRx President and CEO Richard Altus will continue to lead the company. In March, ImpactRx named former Merck executive Mark Degatano senior vice president of the company's client services operations. . . .

And here's why it matters: ". . . .A large pharmaceutical company launching a new drug into a competitive therapeutic area needs to understand what factors most influence the highest prescribers of an existing competitor. That way, the company learns how to create more effective ways to get doctors to prescribe its new drug over the competition’s. They can do this using ImpactRx’s reports, which show in detail what most influences the highest prescribers and their script-writing behaviors. They also track competitors’ launches to gauge the success of their messaging and marketing strategy versus their own. They can then make rapid adjustments to improve their marketing and sales strategies.

Ultimately, the ImpactRx model makes for higher-quality information, which translates into better decisions about how to gain market share. . . .

To gather data from select doctors, ImpactRx equips the physicians with personal digital assistants (PDAs). The PDAs collect information and transmit it to ImpactRx for analysis. ImpactRx also uses SAS to monitor each doctor’s compliance with both PDA usage and data input so that ImpactRx knows the conclusions are valid. “We preserve patient privacy even as we examine what doctors prescribe, how patients respond to diagnoses and so on,” Stephens explains. “We also ask doctors about the effectiveness of the pharmaceutical sales reps, how those reps detail products, what they present and how knowledgeable they are. Then we take the data, package it, do high-level analytics and sell it to the pharmaceutical companies. . . ."

That's drawn from a SAS marketing piece, on how SAS software helps ImpactRx provide insights -- to its large cap pharmaceutical company customers. Draw your own conclusions.

Baxter Med Delivery To Wipe Out Prism Pharma -- And Thus, Carrie Cox's [Conflicted] Chair Is No More

So ends a short-lived, conflict riddled, three month stint as board chair -- for Carrie S. Cox (the ex-Schering-Plough EVP):

. . . .Baxter International Inc. announced today that it has entered into a definitive agreement to acquire privately-held Prism Pharmaceuticals, Inc., a specialty pharmaceutical company based in King of Prussia, PA. Prism Pharmaceuticals has developed and received U.S. Food and Drug Administration (FDA) approval for multiple presentations of Nexterone^® (amiodarone HCl), an antiarrhythmic agent. The Nexterone product portfolio, which does not contain polysorbate 80 or benzyl alcohol, includes the first and only ready-to-use premixed intravenous (IV) bag formulations as well as vials and a pre-filled syringe.

The terms of the agreement include a total consideration of up to $338 million, consisting of an upfront cash payment of $170 million at closing and up to $168 million in future sales-based milestone payments. The transaction is expected to close in the second quarter of 2011, subject to customary closing conditions and expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. This transaction is not expected to have a material impact on Baxter's 2011 financial results. . . .

So long, Ms. Cox. Under Baxter's aegis, this IV med product will be a huge seller -- the strength of Baxter's network with care facilities will be the key. All in all, a great result for the manifold venture investors in Prism.

CEO Ken Frazier Cuts A Favorable Deal With J&J -- Only $500 Million In Catch-Up Damages

Well, this one points squarely to New Merck CEO Ken Frazier's ability to make favorable deals from tough situations. Recall that he was the one who led the effort to put Vioxx liabilities to bed for less than $5 billion -- a coup at the time. [To be fair though, those Vioxx outflows will continue to bleed -- on the order of tens of millions, per quarter -- for the next at least three years.]

As an encore to his Vioxx deal, today, he has been able to escape a potential $10 billion hit over the next three years, with only a half-billion dollar upfront payment (as opposed to as much as $3 billion), while relinquishing only a portion of the non-US sales on Remicade and Simponi. He is truly a master of the high-stakes deal.

Even so, J&J fares pretty well here, too -- it gets more of all the European sales -- 8 percent more, and it keeps for itself (no sharing with Merck) the United States (by far the biggest market), Canada, Central and South America, the Middle East, Africa and Asia Pacific territories. Wow.

It was -- to my experienced eye -- far from clear that Merck had a good argument on the contract, itself — as the contract used a defined term “Change of Control” — but inadvertently did not capitalize the “change” in another place, thus leaving the language open to expert interpretation of what the parties might have intended, by not using the defined term.

That oversight (by legacy Schering-Plough legal people) foreshadowed a poor outcome for Merck — and Mr. Frazier has now deftly avoided the worst of it.

All told, this is a real positive upside surprise for Merck's battered common stock. I'd expect a $2 pop today -- by day's end. Here is a bit of the AP story:

. . . .Merck & Co. will pay J&J $500 million, and the companies will divide distribution rights outside the United States for Remicade and successor drug Simponi, which treat chronic inflammatory diseases like rheumatoid arthritis.

Starting July 1, J&J receives exclusive marketing rights for the drugs in Canada, Central and South America, the Middle East, Africa and Asia Pacific territories. Merck will retain rights through Europe and the emerging markets Russia and Turkey. It will divide the profit from those territories with J&J.

J&J keeps its rights to distribute the drugs in the United States. . . .

Indeed. So ends the single largest overhang on Merck's stock price. My hat's genuinely off to the man -- he's simply done it -- again!

Via An Anonymous Report: In Which We "Get Granular" -- About Coming Oss Layoffs. . . .

The latest, from our erstwhile, now-serial anonymous contributor:

. . . .Merck has the following plan:
A development Center in Oss, with 486 R&D jobs.

This is a Development Center, including late stage Women's Health coregroup with 382 jobs.

104 R&D positions are kept alive in the Pharmaceutical test facility, and those positions become part of the Production Department and Facility Department.

547 jobs disappear as of July 1, 2011 under Merck Research Labs in Oss -- instead of the 1,000 announced layoffs in July 2010.

However, Merck forgot to count the 300 people that already left Merck and whose positions were never filled.

Greetz,

April 11, 2011 3:05 PM. . . .

Thanks -- and we will (with the aid of our readership) keep you posted.

Merck's MSD India Unit, and India's Sun Pharma To Collaborate On Branded Generics

Per Whitehouse Station, itself:

. . . ."Merck's Emerging Markets strategy is driven by our overarching focus on applying innovation across our business from introducing novel compounds to broadening our focus on innovative branded generics," said Kevin Ali, president, Emerging Markets, Merck/MSD. "By combining forces with Sun Pharma, we are complementing our innovative product portfolio with a solid foundation for addressing the diverse needs of patients, physicians and governments across the Emerging Markets. . . ."

Experts estimate that during the coming decade, the Emerging Markets are expected to drive 90 percent of the world's pharmaceutical growth, with 75 percent of that growth coming from branded generics. In these markets, the growing burden of chronic disease, such as cardiovascular disease, diabetes and hepatitis, along with an increasing population and economic prosperity, is leading to an increased demand for branded generics. . . .

We will keep you posted, but this plainly underscores the notion that margins will be very thin in the emerging markets -- for the foreseeable future.

Merck's Co-Developed Vaccine Candidate, Against Hospital Infection MRSA, Suddendly Looks Iffy

After a relatively quiet news weekend on all fronts Merck, the notoriously difficult to combat hospital born infection known as MRSA may remain in the wild for yet another generation, now. Per a Reuters report:

. . . .Patient enrollment into a clinical trial of an experimental vaccine from Intercell (ICEL.VI) and Merck & Co (MRK.N) against the hospital infection MRSA has been put on hold. . . .

The study's independent data monitoring committee (DMC) recommended that no more patients be enrolled into the Phase II/III trial while experts assess the vaccine's benefits against its risks.

Investors interpreted the development as a major setback for the key experimental product and shares in the Austrian biotech group [called Intercell] lost more than a fifth of their value on Monday. . . .

Intercell shares have recovered some of the ground lost earlier in the European trading day, but this development would still seem to suggest that a MRSA vaccine is still an elusive goal. We will keep you posted.

"Fast Fred" -- Perhaps Less A "Seller;" More A Filcher/Pocketer, By My Lights

Pharmalot's Ed Silverman wrote a solid piece on a second tier/also-ran serial pharma/life-science sell-off maven, and mentioned -- in passing -- that Fred Hassan is still the king of that game. I might have mentioned his proclivity to pocket an entirely out-sized chunk of the busted-up companies' cash, for himself (and cronies) along the way (as well as his pattern for seeing his ex-companies plead guilty to felonies, after the fact!) -- but why quibble? Ed is certainly right as to the broad strokes here -- do go read it all:

. . . .Whenever shareholders bemoan the fate of their investment in this or that drugmaker, invariably someone mentions that Fred Hassan should become ceo. Why? Fred has a. . . controversial track record of running companies and then selling to others. This happened when he ran Pharmacia [Editors' note: subsequently resulting in felony plea deals, and the largest criminal fine in pharma history!], which was sold to Pfizer, and more recently with Schering-Plough [also the subject of a DoJ consent decree until 2013], which is now part of Merck. . . .

[J]ust pick the name of a languishing stock and maybe Adams will show up. Unless Fred gets there first. . . .

What a sad set of messes Fred has left in his wake; do be wary all you Bausch + Lomb employees (and lenders).

The Street's Adam Feuerstein -- "A Fast Start" For Vertex's Telaprevir, Come May 2011

This morning, Mr. Feuerstein offers a nice rundown on the next-gen Hep C candidate race -- now rounding the turn, and heading for home. I didn't reproduce it below, but he relegates legacy Schering-Plough's (now Merck's) boceprevir to a bracketed throwaway, as though he was only partially considering letting the sentence run in the final piece. Do take a look at page two of his article.

In any event, he is likely right that Vertex may soon be at least partly a victim of its own success-story -- here's a bit -- do go read it all:

. . . .A typical Hep C patient today is treated with interferon and ribavirin for one year, enduring side effects that include flu-like symptoms for a 40% to 50% chance of being cured. By this spring or early summer, the addition of 12 weeks of treatment with Vertex's telaprevir to a shortened, six-month course of interferon and ribavirin will boost cure rates to 75% to 80%. Telaprevir+interferon+ribavirin will be the new standard of care for Hep C. . . .

[However,] Vertex emerged from EASL under more pressure to make the most of telaprevir commercially before competition arrives on the scene. Telaprevir is a major advance in Hep C treatment and the drug should pass easily through an April 28 FDA advisory panel and receive agency approval on or before May 23. As effective as the drug is for treatment-naive Hep C patients, the drug will have an even more beneficial effect for the hundreds of thousands of patients with Hep C virus that wasn't cured by the current standard of care. . . .

Vertex's dilemma is that investors know this story well and have baked much of telaprevir's potential into the company's valuation already. What concerns investors today and perhaps even more post-EASL is that the slope of the expected telaprevir revenue tail may be steeper than previously appreciated. Investors are also raising questions about what Vertex is doing to sustain its Hep C franchise in 2015 and beyond when new drugs are expected to enter the market. . . .

It is possible that Telaprevir's FDA approcal could arrive in mid to late May -- do stay tuned. As for J&J, here is a big chunk of its next-next generation strategy -- at 2016 and beyond. . . .

Elliott Advisers Not Mollified by Bertolini Addition at Swiss Pharma

Elliott has promptly blunted Actelion's attempt to sever the controversy, per the London Telegraph:

. . . .After exchanging letters to shareholders in the last few days Elliott Partners hit back at the appointment of Mr Garnier. In a statement it said: "Elliott appreciates the fact that Actelion's management has finally accepted our contention that the company's board needs change.

We are pleased to see that our activism is already bearing fruit. However, the proposed appointments of Mr Garnier and Mr Bertolini do not go far enough in making the Board truly independent.

"We will continue to offer shareholders a true choice. . . ."

As I said, do stay tuned -- this is almost certainly only Act I of a three act play. Here was my earlier mention of the board entrenchment controversy.

New Merck: About 500 Legacy Organon R&D Jobs To Stay In The Netherlands

Candidly, this is actually quite a bit better news than I had expected. Merck will keep some R&D jobs open in Oss, per Reuters reporting this morning:

. . . .Organon said on Thursday that Merck has now agreed to keep 486 of the 1000 research and development jobs in the Netherlands, and to set up a new Dutch research centre focused on supporting all of Merck's therapeutic areas as well as emerging economies. . . .

Separately, FDA denied Merck's application to expand the label for Gardasil, to older women in the US.