With the Singulair® patent cliff looming this September, it sure makes sense for Whitehouse Station to push this risk to revenue out to late 2014 -- when, hopefully, things will be rosier. Since late 2011, Merck officers have been mentioning the Astra Zeneca 2012 option decision point as a potentially material patch of headwind -- to Whitehouse Station's sales and earnings lines.
Today's amendment announcement pushes that potential storm out to at least 2014 -- i.e., the longer term sailing forecast -- not this weekend's jaunt. The original option deal handed Astra Zeneca very favorable pricing on the option to reacquire, in my estimation (at one years' sales). This one looks a little more balanced -- if for no other reason than it extends Merck's cut of sales, for two additional years. Note especially here that Merck has signed a pay-to-delay deal with the lead generic competitor on Nexium -- one that effectively extends the patent exclusivity on Nexium to the end of May of 2014. Thus, by the time A-Z pulls the trigger on the option (should it decide to do so), most of the cream will have long-since been completely skimmed. Smart.
And -- a not entirely-unrelated sidenote: with Merck near a 52 week high on the NYSE (as is almost all of the rest of big pharma) -- I'll point out that Wall Street (at least) is betting that whatever the Supreme Court decides should become of our 44th President's Affordable Care Act tomorrow morning, the very savvy deal PhRMA cut -- to limit big pharma's damages -- is likely to stay (mostly) intact. In fact, Wall Street seems to think tomorrow's news will be very good for pharma. [As I've long-indicated, my personal bet is that almost all of the reforms stay in place.]
In any event, here is the Reuters item -- good news:
. . . .The continuation of the partnership is expected to add about $200 million to Merck's revenue and 3 cents to 5 cents in earnings per share in 2012, but does not change the U.S. firm's full-year profit guidance, Merck said on Wednesday.
The revised deal will help shore up Merck's financial performance through the U.S. patent expiration later this year of its big-selling Singulair allergy and asthma drug, although the benefits will dwindle as sales of Nexium decline.
The partnership agreement dates back to a selling and distribution joint venture originally set up between Merck and Sweden's Astra in 1982. . . .
Back in 2010, this partnership accounted for $1.4 billion in sales. Wow.