About three weeks ago (while I was still sailing along the Outer Abacos chain), several analysts wondered why Whitehouse Station would have voluntarily handed over accelerated additional royalty payments -- and effectively back-dated the checks -- in favor of InSite Vision Incorporated, its venture partner in the pink-eye treatment program (key product: AzaSite®). Thus, from one such analyst:
. . . .Considering that Merck's market cap is $132 billion, that royalty payments to InSite will clock in at a minimum $17 million for 2012, and that this new agreement is talking about the difference between $17 million and some number very close to that, this agreement amounts to a gift of something like one one-hundred-thirty-thousandth of Merck's market cap, give or take a few thousandths of a percent.
Far from belittling InSite, I am pointing out here that there is more behind this seemingly tiny royalty adjustment than immediately meets the eye, no pun intended. Whenever an outright gift like this is made in any industry, no matter how small it may seem, one must ask
him[one]self why. . . .
Um. . . Why, indeed?
Well, let me remind our readers that Warburg Pincus controls Bausch + Lomb, and one "Fast" Fred Hassan is now the chairman of the board there, sitting as Warburg's designee. Allow me to additionally remind the readership that Zylet® is the leader of the pink-eye franchise at B + L. In addition, as of Q1 2012, the Hassan-led B+L team was driving a 20 percent down-bubble in AzaSite sales, i.e., stealing significant US market share.
Of course, at the time, InSite complained openly, and bitterly -- that Merck wasn't spending aggressively enough to commercialize AzaSite.
So -- either Whitehouse Station has decided to avoid litigation with InSite on the commercialization efforts score, largely by improving the royalty payment streams, or Merck has truly decided to make an "all-out" run at the "Fast" Fred Hassan pink-eye (B + L) franchise.
Either way, it should make for some jolly good theater, once Q3 2012 results are posted for each of these franchises. We will track it down, then ("Oh, that goofy Fred Hassan!").