Wednesday, November 30, 2011

Recent Commentary, From Facebook Users, On Merck's (US) Non-Vanity URL Page

The below is in response to US Merck & Co.'s statement, on Facebook (posted just before the vanity URL page's keys were disabled, on Monday night). The Merck US statement read ". . .Earlier today, Facebook announced plans to decommission our vanity URL due to an administrative error on Facebook's part. We want to assure you that our Facebook page will remain active and continue to serve as a helpful resource for information on health and well-being. We thank you for your patience and continued support. . . ."

Facebook users have responded -- as set forth below -- since then:

. . . .Peter Sinnott

So when will the real Merck get the url back?

Yesterday at 11:26am · Likes · 10. . . .

James Hooker

As I understand it, either the two companies must come to some sort of agreement over the URL (one takes ownership, or shared ownership?) or Facebook will prevent the 'Merck' vanity URL from being used at all, forcing each company to create a new URL based on their specific company name (MerckKGaA/MerckCo as examples).

6 hours ago · Likes · 1. . . .

James Hooker

Quite ludicrous in my opinion, seeing as the error was Facebook's, and that the vanity URL was originally registered by the German company.

6 hours ago · Likes · 1. . . .

James Hooker

‎. . . .also, regarding the fault being placed on Facebook, surely you KNEW the page you requested access to did not belong to your company?

5 hours ago · Likes · 1. . . .

[Emphasis supplied.] It seems some people really do get it. This could be rather entertaining.

CNBC's Top 10 "Iconic" Turnaround CEOs List Includes Dick Clark -- But Not Fred Hassan

Do go see a slide-show of all ten, here -- from Iacocca (Chrysler) to Cuneo (Marvel) to Bethune (Continental Airlines):

. . . . No. 2 | Dick Clark. . . .

No. 10 (of 10) | Steve Jobs. . . .

It is not clear whether the list is in reverse order, but as much as I respect Mr. Clark, I'd never rank his efforts ahead of the feat Steve Jobs pulled off, over the last decade -- as he returned to Apple. Of course (as Mr. Iaccocca reminds us!), your mileage may vary.

Another Great Question! -- Innocent Mistake (By Merck US)? I Think Not.

Another great question, as to whether Merck & Co. (US) might have simply made an innocent mistake, here -- from a new anonymous commenter, below -- let's take a look:

. . . .Anonymous said...
Isn't is possible that this really was just a mistake?

(a different anonymous)

November 30, 2011 12:39 AM

[I] said. . .

Thanks, Anon. No. 2 --

Clearly, as Facebook itself has admitted, Facebook made a mistake. On that, I think we might all agree.

But I am interested in how Facebook came to make that mistake -- how was it induced to do so?

Let us then make out the case most favorable to "mistake" -- on the part of Merck & Co. (US). Is it possible that no one at Merck US bothered to check whether the Facebook vanity page URL "" was available, before (entirely innocently!) asking Facebook to open a page in Merck & Co. US's name? I guess that could have happened. . . .

But wouldn't it seem more likely that Facebook told Merck US that the page "already existed" -- Facebok, of course, assuming naively, and incorrectly, that Merck KGaA (Germany) was just an international affiliate of US Merck?

[Most people who hadn't recently read the 1919 Treaty of Versailles might have made the same assumption -- in fact no less an authority than the Wall Street Journal still occasionally does -- HAH! But we must assume that at US Merck's Corporate Communications Department, at least, it knows who it is -- and is NOT, right?]

In any event, wouldn't it also then seem likely that Merck US would simply say Oops! -- "we lost our passwords" -- or some such, and induce Facebook to reset the page, effectively "handing over the keys" to that address, to US Merck?

In sum, what I find hard to believe about this scenario (from US Merck's perspective) is that US Merck didn't even know that German Merck had the Vanity Facebook page address.

If Merck US did know about the German Merck vanity page, it becomes nearly impossible to imagine any set of statements that would be completely truthful -- and free from material omissions -- that would still result in Facebook handing over the keys to US Merck.

Certainly, Facebook (just as in the Salman Rushdie name case -- see link below) would require some evidence that Merck US and German Merck were essentially the same person before resetting the passwords, right?

I mean, think about it -- at almost same time, Facebook was very publicly handling the flap over Rushdie's own "pen" name. [In that case, Facebook required the submission of Rushdie's passport, among other things, before returning to him HIS OWN "PEN" NAME(!).]

Something similar must have been requested of Merck US. And short of a misstatement, the change wouldn't have occurred, in my estimation. That misstatement almost certainly came from Whitehouse Station (i.e., Merck US), in my estimation.

So -- yes, Facebook could very well have made a fairly innocent mistake (and has admitted as much).

If you can, though -- do lay out a plausible competing scenario -- one in which the second largest purveyor of drugs in the world is unaware of the German Merck's existence on Facebook, and is unaware of 92 years of its own confused history with that unaffiliated World War I reparations-seized-entity.

Remember, prior to the Summer of 2011, US Merck already had a page on Facebook -- just not a vanity URL address page. So too, did German Merck, but it ALSO had the vanity address page -- since 2010.

If you can convincingly spin me that tale, I'm all ears (and eyes)!

Thanks -- what a great question!


November 30, 2011 9:20 AM. . . .

I think this one is about done -- for now. Now we wait to see when the German Merck reappears as owner of the vanity URL at Facebook. As of this morning, no one owns it.

Tuesday, November 29, 2011

The Facebook Flap -- And Why "Naming Names" Might Well Matter -- In Merck's Defense

In the comments below, an anonymous commenter asked a very cogent set of questions -- and I thought all might benefit from seeing them -- so here they are:

. . . .Anonymous said. . .

What will getting the name(s) of the Merckies who may have strong armed FB into giving them page rights do? I'm not trying to be a jerk, I'm just curious. It's clear that it would have had to be someone from Merck US who called on FB to get the access and that FB should not have given it - but they did.

Am I surprised that Merck US would hijack Merck Germany's page? Absolutely not. Since this took place back in 10/2011, chances are good that the person(s) directly engaged with FB on the matter are gone. There have been massive layoffs during the interim and Corporate Communications, the shared service responsible for this type of thing, was gutted just after that time. Their 60-day WARN period is up in just the next week or so.

So clamor for names if you like, what it will reveal, other than Merck believes it operates above the rules yet again, I'm really not sure. I am sure that it would stymie the chances of said people to find a new job.

November 29, 2011 12:21 PM.

[I] said. . .

I do hear you, Anon. --

Here's why I think it matters. First, Merck (US) could make a defense -- especially if the involved parties have been restructured out, already (as you posit) -- that whatever was done, was outside the scope of their employment with Merck (US). It was, in short, a Palin-esque "rogue" campaign.

In that case, by outing the names, and allowing German Merck to pursue the (alleged) malfeasors personally, Merck US is very-likely off the hook for damages for misappropriation of intellectual property (see ensuing paragraphs).

Alternatively, in the event that Merck US takes the position that the acts were "within scope of employment" -- and "authorized" -- by senior management (by hiding the names from German Merck), then Merck KGaA probably will be able to at least plead a case to recover damages from Merck US, as a matter of corporate law.

Remember, we aren't talking about two teenagers arguing over a garage-band-fan page. There are likely some very-readily available, and significant stat-logs -- of Facebook-referred visits -- to the Merck KGaA site, by customers, doctors and patients, prior to October 2011.

The decrease in visits (likely a cliff-fall, in those same stat-logs) -- from Facebook referrals, now usurped by Merck & Co. (US) -- makes out a claim of "misappropriated" commercial relationships, and valuable intellectual property. Property Merck KGaA contracted with Facebook in 2010, to procure, on an exclusive basis.

Thus Merck US might also be liable for intentional interference with German Merck's contractual relationships (i.e., with Facebook).

So -- if CEO/Chairman Ken Frazier wants to end this cleanly, and quickly -- he will name the names (at least privately, to Merck KGaA's lawyers at Baker & Hostetler, LLP).

In sum, I see no percentage in Frazier's arguing that Merck US had the right to "squat" on the Facebook page vanity URL -- because then (as you point out) Merck US once again looks the bully, or at least the oaf.

"Conduct unbecoming" a company that claims it is all about saving lives, right?

Unless Frazier is far less sophisticated about online social media than I suspect he is, he will cut a deal with German Merck to provide the names, and let German Merck have the vanity address -- perhaps with the negotiated trade-out, toward the top of the page, something like "Looking for US Merck?" (then click here!). . .

But as ever, we shall wait to see.

Namaste, and thanks for your input!

Do stop back.

November 29, 2011 1:35 PM

Anonymous said...

Thank you for your thoughtful response. I agree to your points now that they've been expressed more fully.

November 29, 2011 3:41 PM. . . .

So there you have it.

92 Years Of Pharma/Chemicals Confusion: Crystalized -- Improbably -- On Facebook

As I have repeatedly observed, it is puzzling that for more than nine decades, two of the largest multi-national public companies in the world (by revenue) haven't done more to "re-brand" their identities -- in ways which would help distinguish the one, from the other.

Now, it seems that a 21st Century phenomenom will do it for them. Overnight, Facebook's administrators disabled the "/Merck" vanity URL -- citing the spat between Merck KGaA (Germany) and Merck & Co. (United States), as to which concern may properly claim the name -- and thus, the vanity URL on Facebook.

Facebook's rules here are clear:

. . . .5. Protecting Other People's Rights

We respect other people's rights, and expect you to do the same.

1.You will not post content or take any action on Facebook that infringes or violates someone else's rights or otherwise violates the law.

2. We can remove any content or information you post on Facebook if we believe that it violates this Statement. . . .

III. Application Content. . . .

B. Prohibited Content | You agree that you will not promote, or provide content referencing, facilitating, containing or using, the following. . .

2.Content that infringes upon the rights of any third party, including intellectual property rights, privacy, publicity, moral or other personal or proprietary right, or that is deceptive or fraudulent. . . .

C. Rights to Content

1.You must ensure that you own or have secured all rights necessary to copy, display, distribute, deliver, render and publicly perform all content of or within your application to Facebook users in all countries where you make the content available. . . .

It now seems pretty plain that US Merck didn't have those rights -- as to the "/Merck" vanity URL. Especially not if Merck US (allegedly) claim-jumped the right to the vanity URL, from the German entity. [There is essentially zero chance that Facebook spontaneously changed the passwords for Admin access (passwords originally granted only to Merck KGaA Germany), without some affirmative representations and showings (which, must have been, at least, less than completely truthful) from someone connected to Merck & Co. US, here -- let's be honest, now -- we all know how Facebook "support" is anything but.]

So -- given that Merck & Co. was just exactly one week ago telling the world about its newly renegotiated "Corporate Integrity Agreement" (after another DoJ plea deal -- costing $950 million of the stockholders' money, just this time -- and over $6 billion, overall!), it is time for Merck & Co. to immediately and voluntarily identify the employees or contractors involved in convincing Facebook's staffers to hand over the keys (either by omission of relevant information, or outright deceptive representations to said Facebook staffers) to Merck KGaA's vanity Facebook URL sometime back in October 2011.

While Merck US may well argue it has the right to the Merck name in various geographies, it can no longer credibly claim that it -- as an organization -- thinks its conduct in obtaining the vanity URL was lawful, vis-a-vis Merck KGaA's open, notorious (and most importantly) prior (since early 2010) rights to that URL. [Here recall that back then, in 2010, Merck & Co. (US) was largely forsaking social media applications, on regulatory entanglement concerns.] In short, it was shying away, at a time when German Merck was deciding to move forward, aggressively. Merck US cannot reclaim that lost ground, and especially not so now by (alleged) subterfuge.

It is time for CEO Frazier to act on his new transparency: Name the names, Mr. Frazier -- don't make Merck KGaA litigate in New York to get them.

Put this suddenly very-embarrassing matter to bed, now.

"Network World" Finally Catches Up To Us

There's nothing even remotely new in this MSM story -- it is actually about six hours behind our reporting -- but it is as good an excuse as any to run a new graphic on the "Un-friending at Facebook" flap between the two pharma behemoths:

. . . .The page was not accessible by late Monday, and the Merck U.S. page had moved to another location on the social network. . . .

Germany's Merck KGaA threatened legal action after it said it lost its Facebook page apparently to rival Merck & Co. in the U.S.

Facebook on Monday apologized for what it described as an "administrative error". . . .

The dispute reflects the growing importance businesses attach to having branded pages on Facebook and other social networks. . . .

We will keep you posted, but it seems a certainty now that KGaA will be able to discover the identity of the Merck (US) agents behind the bid to "claim-jump" the German Merck KGaA Facebook vanity address.

Monday, November 28, 2011

Merck (US): "We Will Remain Active" On Facebook

UPDATED | 11.28.11 @ 11:10 PM EST: The Facebook vanity address, "/Merck", is now deactivated, even for members. To find either the German Merck vanity page, or the US Merck vanity page, one must search the word "Merck" in the search toolbox, then select one of the two links.

For its part, German Merck had this to say, late tonight -- per a published report:

. . . .“We are happy with Facebook’s apology, and we are still looking into the matter,” a Merck KGaA said in a statement. . . .

As ever, there is thus likely more to come -- and likely out of the Supreme Court of New York. There is now no doubt, though, persons formally affiliated with US Merck were in control of the disputed Facebook page as late as 8:50 PM EST, tonight. See below.


Yep -- Whitehouse Station says it will fight on, on Facebook -- but it is also pretty clear that the United States Merck doesn't expect it will be able to keep the simple vanity address "/Merck" designation -- this was posted just now, on the Facebook vanity page:
8:50 PM EST | . . . .Greetings. Earlier today, Facebook announced plans to decommission our vanity URL due to an administrative error on Facebook's part. We want to assure you that our Facebook page will remain active and continue to serve as a helpful resource for information on health and well-being. We thank you for your patience and continued support. . . .

Like · Comment · 6 minutes ago. . . .

We suspect it will ultimately be returned to German Merck (absent a paid-for settlement, by Merck US). But we will keep you informed. Below is the screen-shot of the above text:

Facebook's Mea Culpa: "Oops! -- We Gave The WRONG Merck Admin Access Rights!"

Ed, over at Pharmalot, once again has it all -- do go read his -- but here's a bit of it:

. . . .The social-networking site blamed an "administrative error" for the problem. "We apologize for any inconvenience this may have caused," said a Facebook spokesman.

Facebook's statement comes a week after Merck KGaA asked a New York City court to force Facebook to explain how the German company lost the rights to the URL on the social-networking site.

Merck KGaA entered into an agreement with Facebook for exclusive rights to the URL in March 2010, according to the filing. But in October 2011, the German company discovered that its administrative rights had been taken away and the page was instead filled with content from its rival, Merck & Co.

German Merck's filing, made last week, said its Facebook page has been "misappropriated," adding that it isn't yet clear how that happened nor who is at fault. The German company's case has been brought against Facebook because the Palo Alto, Calif., company hasn't provided clear information about what happened, the filing stated.

Currently, the address still shows as though it belongs to the U.S. company. But the URL will soon become unavailable to either company until the two companies mutually agree on who should have rights to the URL, said a person familiar with the matter. . . .

Will Merck & Co. now affirmatively seek to keep the web-portal, as US Merck content?

Will German Merck seek damages? It seems plain that someone affiliated with Merck & Co. (US) affirmatively uploaded the content -- and that someone simply had to know that German Merck would view the squatting as wrongful. Stay tuned -- for Act II.

We will keep you posted, as German Merck should certainly be able to discover the names of the agents to whom Facebook gave the admin access, back in October 2011, by virtue of its New York Supreme Court filing.

Note: as of 3:45 PM EST, on November 28, 2011 the page in dispute looked like the below screen cap:

Ex-Merck-CEO Dick Clark Formally Retires This Thursday

The Inquirer, Philly's paper of record, has a nice summary of his career here -- below is a bit, but be sure to go read it all:

. . . .He helped stabilize the company, overseeing the launch of eight products in two years, including the diabetes drug Januvia, the HPV vaccine Gardasil and the HIV medication Isentress. He also led Merck through its $49 billion acquisition of Schering-Plough Corp., which helped expand Merck’s product pipeline and gave it entry into Asian markets, where Merck lacked a strong presence.

But thousands of employees have been laid off under Clark’s tenure, many because of the Schering-Plough merger. The company has lost patent protection on some of its best-selling drugs. Frazier, in one of his first conference calls as CEO, said Merck wouldn’t meet previously announced earnings goals.

Merck, which is headquartered in Whitehouse Station, N.J., has 90,000 employees worldwide. More than 10,000 of those employees work in Montgomery County, and most of them are at West Point, the sprawling manufacturing facility in Upper Gwynedd. Clark started there in 1972, and was head of manufacturing before being named CEO. . . .

So it goes.

Saturday, November 26, 2011

Pure Science Break -- NASA's Mars Alert Edition!

Just as I thrilled to the earlier Mars rover mission animations (circa 2007 and 2008), "Curiousity" (2011-2012) has captured my imagination, all over again:

It will look for traces of methane, an organic chemical, among other things. Now we wait for August 2012, and seven minutes of a white knuckle ride -- to a soft Martian touchdown. . . .

[Tech Tip: If you are viewing this on a non-Flash enabled device -- like most Apple products running iOS -- you'll need to go directly to this video's page at, to watch it.]

One More, On Facebook's "Un-Friending" Of Merck (Germany)

This is such rich (and fun) fodder for headline writing, no?

Do go read it all, but a bit from the Independent is here:

. . . .After more prodding, Marissa eventually writes to say that Facebook is "looking into the matter" but it takes several more emails and several more days before "Xavier, User Operations, Facebook" writes with another unhelpful message. . . .

"Xavier wrote back on 14 November stating that 'we do not offer functionality or technical support from this email alias', and again displaying either an incomplete knowledge of the problem or evasiveness. I asked again for a telephone number in order to better explain the issue, to which Xavier incredibly replied that 'no one is available for a call at this time'. . . ."

When a lawyer writes the word "incredibly", you know he has just torn the last of his hair out. It makes holding for a call centre operative sound positively appealing. . . .

Indeed. We will keep you informed.

Friday, November 25, 2011

A Wrinkle In Settling the Merck/Schering-Plough ENHANCE-Era Securities Class Actions?

It seems some part of the profferd economic analyses, related to the damages allegedly suffered by the putative classes of plaintiffs in the Merck & Co. (Case 08-2177), and the legacy Schering-Plough (Case 08-397) federal securities cases related to the ENHANCE/Vytorin/Zetia study results delays, was in error.

The parties have agreed to re-depose the plaintiffs' expert, Chad W. Coffman (depicted at right), before moving forward and arguing the matter of whether a pair of classes may properly be certified by the New Jersey federal District Courts -- from the joint stipulation and proposed order, then:

. . . .WHEREAS, on November 18, 2011, plaintiffs served an "Errata to Expert Report of Chad Coffman" ("Errata") following the exchange of opening and rebuttal expert reports, and after the deposition of Chad Coffman was taken on November 15, 2011; and

WHEREAS, the parties have agreed that defendants shall be given an opportunity to depose plaintiffs' expert concerning the "Errata" before filing their opposition to the motions for class certification;

NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and between the undersigned counsel for the parties that:

1. Plaintiffs will make Mr. Coffman available for deposition concerning the "Errata" on or before November 29, 2011;

2. Defendants' oppositions to the motions for class certification will be due by 5pm on December 6, 2011, and Plaintiffs' reply briefs will be due by January 31, 2012;

3. Defendants reserve all rights to challenge the appropriateness, validity, and admissibility of the "Errata" and opinions therein, whether by motion or otherwise. . . .

Joseph A. Dickson,
United Stated Magistrate Judge

So -- Mr. Coffman's deposition should be taken this coming week. We will keep you posted.

Ed's Merck KGaA Vs. Facebook Story Catches Fire -- Worldwide

Several outlets in Europe have even produced short video reports of the story, and practically every major news outlet's business page has run a story.

But Ed was the first -- at Pharmalot. Even PC mags are covering it.

You will find more, here as well. . .

. . . .Facebook "has not been cooperative" in restoring the page, and in several alleged communications appeared nonresponsive or evasive in dealing with Merck KGaA, the filing said.

"Because Facebook is an important marketing device, the page is of great value to Merck, and its misappropriation is causing harm to Merck," Merck KGaA said. "It is not clear how that happened or who is at fault nor. . . is Facebook providing clear information about what happened."

Merck KGaA said it may bring legal action alleging breach of contract and interference with its business. It did not indicate whom it may sue. Merck & Co is not a defendant.

Facebook spokesman Andrew Noyes and Merck & Co spokesman Ronald Rogers said their respective companies are looking into the matter. Merck KGaA declined to comment. . . .

We will keep you posted, but there are no additional filings or rulings in the Supreme Court of New York, yet -- we just checked. It will be very interesting to find out whether someone at the US Merck paid for the right to take-over the Facebook portal address. It is hard to imagine that Facebook would have done this all on its owm, for free -- but we shall see.

Wednesday, November 23, 2011

Merck's Fosamax® ONJ MDL Likely To Be Settled? Could Be.

With Boles III (damages, to a jury) set to go to trial in early March of 2012, this is welcome news -- on the federal Fosamax® osteonecrosis of the jaw multi-district litigation.

More widely, I must note that the emerging meta-narrative here is that Merck is no longer a "litigate at all costs" company. By my count, it has announced, or is working on at least six very high-profile settlements of past legal claims and investigations -- in just the last three months. [Seven, in the multi-billion dollar category, if one counts the J&J arbitration settlement of this past spring.]

That, a sea-change, makes. . .

And a wise one, in my estimation. CEO Frazier sees things that GC Frazier (perhaps) did not. Reputation still matters -- and when one is the second-largest pharmaceutical company in the world by revenue (at least for one more month, anyway!), seeming an endlessly-provoked bully does one very little marginal good (except, of course, in the most extraordinary of cases).

Here's to hoping that Whitehouse Station will put Fosamax in its rear view mirror, and soon. The sales have eroded to the point that it shouldn't be supporting such a deep trough of litigation reserves. From the overnight order, in Manhattan, then:

. . . .During the past year, the Court has discussed with the parties to this multidistrict litigation the possibility of appointing a special master to conduct settlement discussions of the over 900 cases in this docket. To that end, the Court proposed the names of five distinguished lawyers willing to serve as the Special Settlement Master and supplied counsel to the parties with their resumes and fee information. The parties were given several weeks to confer and have now reached an agreement about the appointment of the Special Settlement Master.

With the consent of the Plaintiffs' Steering Committee and defendant Merck Sharp & Dohme Corp., the Court hereby appoints John D. Feerick, Esq., Dean Emeritus of the Fordham University School of Law, as the Special Settlement Master. Mr. Feerick will file the affidavit required under Rule 53 (b) (3) of the Federal Rules of Civil Procedure by December 7, 2011. As Special Settlement Master, Mr. Feerick is authorized to conduct any proceedings permissible under Rule 53 that are necessary to resolve all or any part of this multidistrict litigation in a fair and efficient manner. Pursuant to Rule 53(g)(2)(A), the parties shall pay in equal shares the fee for Mr. Feerick's services. Mr. Feerick will schedule meetings with counsel in the near future, after he has familiarized himself with this litigation.


/s/ John F. Keenan,
United States District Judge

Dated: New York, New York November 22, 2011. . . .

It is still by no means a certainty that a settlement will ensue, but it does suggest a shift from the prior "try every case; concede nothing; [almost] never settle" posture Merck had been known for, when now-CEO Frazier had been the General Counsel. Refreshingly good business sense.

We will keep you posted.

Did "Our" Merck "Car-Jack" The German Merck's Facebook Portal?

Dueling Facebook rights -- it would seem -- between two often-confused drugmakers, one German, one in Whitehouse Station, per Ed's fine, insightful reporting at Pharmalot this morning. Do go read it all, but here is a bit:

. . . .Merck KGgA, the drugmaker based in Germany, has filed a lawsuit in hopes of forcing Facebook to explain how its page on the wildly popular social network was apparently misappropriated by that other Merck - the drugmaker based in the US. Somehow, you see, its Facebook page was replaced by its rival’s images and information.

. . .[E]ach drugmaker owns exclusive rights to the Merck trademark in different geographical areas. . . [so] a little confusion. . . [may] occur. . . .

[A]n attorney for Merck KGgA notes in the lawsuit that the drugmaker supposedly entered into an agreement with Facebook in March 2010 for the exclusive use of a web page with this address - - and administrative rights were assigned to just a few people, including Merck KGgA employees or an Internet service provider.

But last month, the [German] drugmaker checked its Facebook account and found that it no longer had administrative rights to the page and the page had content that appeared to be created by, and is related to, the other Merck, according to the lawsuit. . . .

We will keep an eye on this lawsuit, too -- but it puzzles me that two of the largest commercial entities on the globe haven't done more, over the decades, to separate the naming/trade dressings from each other. That is hard to understand -- even though we all know the history, here.

And, in any event, a happy and safe Thanksgiving to one and all -- whereever your travels take you. Namaste!

Tuesday, November 22, 2011

Merck Finally Charges Off The $950 Million Vioxx® Reserve -- Booked Back In October 2010

Surprising almost no one, Whitehouse Station this afternoon concluded its plea deal with the federal (and most state) authorities over its prior marketing of the withdrawn Vioxx® pain medication, which was still on the market in late 2004. A new corporate integrity agreement will be signed, and I will link to it, right here, as soon as the associated (and required) SEC Form 8-K is filed on it, by Merck.

Even though widely expected, this is nearly a billion, afterall -- from the Merck presser, just out:

. . . .Merck. . . announced it has reached a resolution with federal and state authorities regarding a previously disclosed investigation concerning Vioxx. Merck voluntarily withdrew Vioxx from the market in September 2004. The company previously recorded a charge of $950 million in October 2010 in anticipation of today's agreements.

Under civil settlement agreements signed with the United States and individually with 43 states and the District of Columbia, Merck will pay approximately two-thirds of the reserved charge to resolve civil allegations related to Vioxx. As a result, the United States and the participating states have released Merck from civil liability related to the governments' allegations regarding the sale and marketing of Vioxx in the United States. Previously disclosed litigation with seven states remains outstanding.

The civil settlement does not constitute any admission by Merck of any liability or wrongdoing.

"We believe that Merck acted responsibly and in good faith in connection with the conduct at issue in these civil settlement agreements, including activities concerning the safety profile of Vioxx," said Bruce N. Kuhlik, executive vice president and general counsel of Merck.

Separately, the company agreed to plead guilty to a misdemeanor under the Federal Food, Drug, and Cosmetic Act arising out of the marketing of Vioxx by company representatives to physicians in the United States for the treatment of rheumatoid arthritis before the FDA's approval of that indication in April 2002. The company will pay a fine of approximately one-third of the reserved amount to the federal government as part of the plea agreement. . . .

Now we wait for the securities, ERISA and derivative settlements related to the ENHANCE debacle. Those should appear in Q4 2011 as well -- once Merck's board approves them. How much more will they cost? We will let you know, but those were largely due to the acts of high executives at legacy Schering-Plough, not Merck.

Monday, November 21, 2011

Gilead Will Obtain No "Fairness Opinion" From a Banker, As A Condition To the Pharmasset Deal

When Merck (on an opinion from JP Morgan) busted-up/bought Schering-Plough, and when Pfizer (also on an opinion from JP Morgan) bought Wyeth, each of the parties -- the acquiror, and the target -- in each deal obtained written fairness opinion(s) -- that the deals were fair from a financial point of view, from a reputable investment bank.

Not so, early this morning, in the case of Gilead -- as it announced a purchase of Pharmasset. Let's puzzle as to why that might be so, shall we?

Only Pharmasset (i.e., the target), per Section 5.3(a), on page 46 of the SEC-filed merger agreement, is slated to receive such a so-called fairness opinion. Interesting. The opinion will be given by Morgan Stanley, by the way -- the same firm that gave Schering-Plough its fairness opinion, in the Merck bust-up (Goldman Sachs & Co. also gave Schering-Plough an opinion, BTW).

I guess when you're paying about one-third of your market cap, in cash, today, for what many analysts estimate might be around $3 billion a year by 2018, and beyond (i.e., more than six years away -- and all subject to FDA, NICE and EMEA approvals). . . it gets tough to find a banker that will say such a deal is fair, from a financial point of view, to the holders of Gilead common stock.

I am just sayin'. . . Wow.

[That might be some evidence -- should dissident shareholders of Gilead decide that they are taking a bath here. . . their own board didn't procure a fairness opinion, to protect them (and the board, itself). Wild.]

Is Gilead Overpaying, Today -- For "The Future Hope" -- Of Hep C Cures?

Just over $11 billion in cash (for a product not likely to be fully-released into the US markets before 2015) is very heady, in these cash-constrained times -- based on a small study of under 200 patients, in total. Even so, the 100 percent cure rate is indeed an out-sized result.

The price is particularly eye-popping, given that Vertex is already effectively curing many many thousands of Hep C patients (worldwide), week-by-week here, with Incivek® (and to a much smaller degree, Merck's Victrelis® is also curing patients, on a 48 week regimen).

Per the New York Times, today:

. . . .Under the terms of the deal, Gilead will pay $137 a share in cash, nearly 89 percent above Pharmasset’s closing price on Friday. That is also nearly 55 percent above Pharmasset’s 52-week high of $88.52.

Major drug makers have been on an acquisition spree in the last few years, driven by the need to refill their product pipelines. Gilead, based in California, has itself made 10 deals since 2006, though the Pharmasset deal is by far the biggest takeover in Gilead’s 24-year history. . . .

The takeover is expected to dilute Gilead’s earnings through 2014, and then begin adding to them in 2015. . . .

I'll return with some more precise financial analysis, and acquired-leverage insights, later this evening -- but I think this is the very top of the range for this particular target. And perhaps -- just perhaps -- a waft of desperation is floating through.

Forgetting for the moment a rather yawn-inducing analysis of Gilead's paying -- today -- three times 2018 peak sales (and the $6 billion of increased/acquired leverage), I am very skeptical that any well-insured (or government-payor eligible) Hep C patient will delay treatment to perhaps 2015, or later, for the Pharmasset candidate.

By 2015-2016, most of the insured patients (north of 80 percent, I predict) will have already been cured by Vertex (and a smaller number will have been cured by Merck).

That leaves new cases, and the uninsured/ineligible/developing world cases -- for Pharmasset. Even then, in those arenas, it will compete with Vertex and Merck.

While it is true that the Pharmasset offering will be all-oral, and fewer doses per day, that won't command a price multiple in the developing world, or even in western Europe -- when telaprevir and boceprevir will have been well-entrenched by then.

In short, I just don't see it -- certainly not when it takes the form of all cash, and $6 billion of that, as Gilead's added debt.

Finally, the suggestion (this morning, by Gilead management) that the deal becomes accretive in 2015 for Gilead implies that many many Pharmasset employees are soon due to be declared redundant. That's unfortunate, in the extreme.

Saturday, November 19, 2011

Merck's Head of HR Named To Fast Food Company Board Of Directors

I might be tempted to make a snarky comment about this relationship "priming the pump" for Merck's cholesterol management franchises (in later life), by helping to increase consumption of KFC, Pizza Hut and Taco Bell products. . . but I won't. It is just a touch ironic, though, right?

Even so, it is good to see Merck execs getting recognition, in other fields. Per the Seattle Times' account here:

. . . .Fast food chain operator Yum! Brands Inc. said Friday that pharmaceutical executive Mirian M. Graddick-Weir was appointed to its board of directors. . . .

Graddick-Weir, 56, will take her seat on the board at the company's next board meeting on January 26, 2012. She is executive vice president of human resources at Merck & Co., based in Whitehouse Station, N.J. . . .

Kudos to her!

Monday, November 14, 2011

Judge Keenan Declines Pilot Project Inclusion, For Fosamax® MDL

As I mentioned at the end of my litigation update post, this morning, Judge Keenan had been asked last week to consider whether to include the Fosamax® MDL in a pilot project, for complex case management, in the federal courts. This afternoon, he signed an order declining to participate, thus:

. . . .Pursuant to Standing Order M10-468 [ECF No. 1089], the Court determines that this multidistrict litigation (the "Fosamax MDL") should not be included in the pilot Project Regarding Case Management Techniques for Complex Civil Cases in the Southern District of New York, because following the practices already established in the Fosamax MDL will lead to its most efficient resolution. Unless amended or superseded, all case management orders entered in the Fosamax MDL prior to November 4, 2011, remain in effect. (Signed by Judge John F. Keenan on 11/14/2011) Filed In Associated Cases: 1:06-md-01789-JFK-JCF et al. . . .

So -- on to the Boles III damages jury trial -- in March 2012. Will MRs. Boles win more -- or less -- than the amount at which Judge Keenan set her award? Or will the whole MDL settle before then? Do stay tuned.