Wednesday, September 26, 2012

Thanks Again, Fred Hassan! ENHANCE Securities Claims May Proceed As Federal Class Action


This is bad news for New Merck, and represents almost a complete dismissal of the defendants' arguments to avoid having the ENHANCE securities claims become a federal class action. As of tonight, those claims are a duly certified federal class action, thus per Judge Cavanaugh, sitting in New Jersey's federal District court (the full 22 page opinion in PDF, here):

. . . .Plaintiffs allege that Schering knew or recklessly disregarded, but did not disclose, the results of the ENHANCE study, which showed that Vytorin was in fact no more effective at reducing CA IMT than simvastatin alone. Plaintiffs allege that Schering knew the results of the ENHANCE test well before the results were “un-blinded,” but withheld that information in order to forestall any negative implications the results would have on Defendants’ common stock price. . . .

The gravamen of Plaintiffs’ allegation is the same whether Lead Plaintiffs purchased common stock, preferred stock, or options; that is, Lead Plaintiffs need to prove, inter alia, that Defendants made material misstatements and/or omissions regarding the ENHANCE trial. Accordingly, the Court finds that Lead Plaintiffs may represent options traders and preferred stock traders, and the Court will not exclude those traders from the class. . . .
For For the reasons stated herein, the Court certifies this matter as a class action, and approves the definition of a Class as follows:

All persons and entities that purchased or acquired Schering common stock, or call options, and/or sold Schering put options, during the period between January 3, 2007 through and including March 28, 2008, and who did not sell their stock and/or options on or before January 14. 2008, and who were damaged thereby. . . .
This will greatly increase the pressure on New Merck to settle this matter. It seems clear that Judge Cavanaugh now "smells the smoke. . . ." Merck would be wise to not let him "see the fire." While settlement talks/mediation continue, I think there is still a firm trial date set for November 13, 2012 -- should the efforts fail.

Tuesday, September 25, 2012

Boles Fosamax® ONJ Case Settles -- By Confidential Agreement


According to a report published in Equities.com, it appears that the latest in-court status conference revealed an agreed settlement of the Boles Fosamax® ONJ claims. Do go read it all, but here is a bit:

. . . .A Fosamax lawsuit filed by a woman who suffered from Fosamax jaw damage has reached a confidential damages agreement. . . . The plaintiff, Shirley Boles, first brought a claim against Merck & Co., manufacturer of the popular osteoporosis drug, in September 2009, alleging that the drug caused her to suffer from osteonecrosis of the jaw. The first Fosamax jaw lawsuit resulted in a mistrial. In a subsequent trial in June 2010, a jury awarded Boles $8 million in damages—which a judge later deemed excessive, and reduced to $1.5 million. Rather than accepting the reduced amount, Boles sought a third trial which was set to begin this month. However, before the trial commenced, the parties reached a confidential damages agreement. The amount of damages has not been disclosed. . . .
Good news for all involved -- and it removes some uncertainty from Merck's exposure profile here. Even so, the next Fosamax case -- Scheinberg -- goes to trial on January 15, 2013.

Moody's Ups Industry Outlook To "Stable"; Merck Settles Legacy Schering-Plough Coppertone® Claims


Each of these stories is well-handled on the expert keyboard of Ed Silverman over at Pharmalot -- here is the Moody's outlook upgrade story -- and here is Ed's Coppertone® false advertising settlement story -- and a bit:

. . . .As part of the deal, Merck agreed not to use the terms “sunblock,” “waterproof,” “sweatproof,” “all day” and/or “all day protection” in the Coppertone labeling, advertising, marketing or promotion. And Coppertone products must contain labels that comply with federal law, according to the settlement agreement. . . .
Do go read all of Ed's.

Friday, September 14, 2012

Merck -- Like Other Global Pharma Companies -- Ends ALEC Funding


Kudos to Chairman Ken Frazier, here -- Merck has announced that it quit the controversial American Legislative Exchange Council (ALEC), which drafts model bills that are often then copied by ultra-conservative state legislators, and introduced (and more than just occasionally, enacted) across the country, because of "budget constraints and policy priorities. . . ." Well. Okay. Close enough.

J&J was more direct, when it left ALEC in June, saying ALEC's agenda didn't fit with its businesses' agendas.

I quite agree that loosening handgun control is not something that a pharma concern ought to be pushing. Pharma's institutional messaging is usually about promoting healthy lives, not concealed-carry, handgun-enabling legislation. Similarly, it is unclear why a pharma concern would advocate for stricter state voter ID laws -- many of which disproportionately disenfrancise the poor and people of color. [The Texas appellate courts held, just two weeks ago, that the putative Texas voter ID law was tantamount to a "poll tax" -- and struck it on constitutional grounds.]

This is the right course for Whitehouse Station to take. If nothing else, it sends a message that pharma companies should care more about drug reimbursement laws than "stand your ground" -- or "right to kill" laws.

From the New Jersey Star-Ledger, do go read it all:

. . . .ALEC has been embroiled in national controversy this year for its role pushing bills that toughen voter-identification requirements and loosen self-defense laws to allow more instances of deadly force. An example is Florida’s "Stand Your Ground" law, which figures prominently in the ongoing case over 17-year-old Trayvon Martin’s shooting in February.

New Brunswick-based Johnson & Johnson, another huge pharmaceutical. . . left ALEC in June, [saying] those initiatives deviated from the business agenda it joined to support. . . .

More than three dozen companies have left ALEC this year, including Amazon.com, McDonald’s, Coca-Cola and Kraft. . . .

'Tis high time, indeed. Sincere H/T here, to Pharmalot.

Tuesday, September 11, 2012

Merck Smartly Grabs The Bottom Of the Yield Curve -- Prices $2.5 Billion Of Debt, In Three Tranches


But first -- I'll note that Merck's Adam Schecter is presenting the usual slide deck -- at Noon Eastern today -- in New York, before a Morgan Stanley audience. And it's a dividend yield story. So, do click the link to tune in.

Now -- to put the debt offerings in a personal perspective, here -- getting 30 years of unsecured debt at a 3.688 percent yield is pretty sweet; just as getting five year money (also unsecured) at 1.139 percent is. . . pretty sweet. Consider (as comparators) that your 30 year mortgage, which is secured by your home (unlike Merck's borrowings), is probably around 5 percent -- at best. No, 1.1 percent is most akin to your credit card rate -- which is likely around 9.8 percent at your best. Merck can charge for five years of maturity at 1.1 percent. Like I said -- that's sweet -- and the benefit of being a "AA" rated credit. Here's the story -- per Reuters:

. . . .Merck & Co Inc on Monday sold $2.5 billion of notes in three parts, said IFR, a Thomson Reuters service.

Bank of America Merrill Lynch, Citigroup, and JP Morgan were the joint bookrunning managers for the sale.

TRANCHE 1 

AMT $1 BLN COUPON 1.1 PCT MATURITY 01/31/2018
TYPE NTS ISS PRICE 99.797 FIRST PAY 07/31/2013
MOODY'S A1 YIELD 1.139 PCT SETTLEMENT 09/13/2012
S&P DOUBLE-A SPREAD 50 BPS PAY FREQ SEMI-ANNUAL
FITCH A-PLUS MORE THAN TREAS MAKE-WHOLE CALL 10 BPS

TRANCHE 2

AMT $1 BLN COUPON 2.4 PCT MATURITY 09/15/2022
TYPE NTS ISS PRICE 99.965 FIRST PAY 03/15/2013
MOODY'S A1 YIELD 2.404 PCT SETTLEMENT 09/13/2012
S&P DOUBLE-A SPREAD 75 BPS PAY FREQ SEMI-ANNUAL
FITCH A-PLUS MORE THAN TREAS MAKE-WHOLE CALL 12.5 BPS

TRANCHE 3

AMT $500 MLN COUPON 3.6 PCT MATURITY 09/15/2042
TYPE NTS ISS PRICE 98.411 FIRST PAY 03/15/2013
MOODY'S A1 YIELD 3.688 PCT SETTLEMENT 09/13/2012
S&P DOUBLE-A SPREAD 90 BPS PAY FREQ SEMI-ANNUAL
FITCH A-PLUS MORE THAN TREAS MAKE-WHOLE CALL 15 BPS. . . .

And, now to catch up on a bevy of assorted Merck updates, here: Merck had promising results from its new sleep candidate, its HPV vaccine has been recommended in the EU, and the legacy Merck Januvia franchise is doing remarkably well, of late. Finally, Merck will likely file an NDA with FDA in 2013 -- for approval of its CV candidate vorapaxar.

So there you have it.

Sunday, September 2, 2012

InSite Vision's AzaSite® Pink-Eye Franchise: A Proxy Battle Between Ex-SGP-CEO Fred Hassan, And Current MRK Executives?


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!").