Saturday, March 30, 2013

The Case For Invokana® -- As A Mega-Blockbuster


As I mentioned last night, most Wall Street analysts are offering only moderately bullish estimates of Invokana®'s peak 2017 sales, this early in the game. And I partially agree -- it makes some sense to be conservative here, given the questions about other drug candidates in this new class.

On the other hand, it appears that Invokana will have a very clean FDA label (very few scary warnings -- no black box warnings), and will be able to note the study results showing "off-target" weight-loss effects -- in most patients on the drug. Given that obesity and this type of diabetis are closely associated, that may be a very powerful finding, for patient conversion -- to this new class. It will be a once a day pill, and very convenient to take.

In addition, J&J's Janssen unit is now saying that the wholesale price will be about $8.77 per pill -- so, retail will be about 30 percent more, or around $11.40 per pill. That makes the per patient cost about $4,160 a year. That makes the potential "doughnut hole" problem manageable, for the millions of US diabetis patients now relying on Medicare/Medicaid, to pay for their treatment costs. With some 26 million Americans suffering Type II diabetis, the disease burden is vast (as is the potential market).

At 365 pills a year, at $11.40 per pill, Invokana need only acheive five per cent market penetration in the US alone, to eclipse my predicted $5.4 billion in annual sales. Canagliflozin has already been filed for approval in the EU, and J&J may hear by mid-this-summer, on that application.

Said another way, even if we assume only one in four patients will be good candidates for the drug, it only need capture a fifth of those patients to reach the $5.5 billion in annual sales, in the US alone.

Now suppose that "only" seven per cent of US patients switch, or begin therapy on Invokana -- that's a $7.57 billion a year revenue stream. Yes, that means my thesis is about ten times richer than Wall Street's current prognostications.

My corallary thesis is that a sizable chunk of these sales will come right out of Merck's Januvia®/Janumet® franchises.

Don't misunderstand: Januvia and Janumet will still sell into the low billions of dollars per year, but it won't continue to be above $5 billion a year much longer, in my estimation. I'd guess that Merck will see declines to around $2.5 to $3 billion a year -- by 2016 or 2017. That's my guess.

If that scenario occurs, my guess is that it costs Merck about $2 per share in its NYSE trading price, all in.

And given how far away from the Wall Street endorsed estimates I am -- at this point -- I would argue that my predicted impact is not priced into Merck's NYSE trading, as of last Thursday night. So (absent some other unrelated material developments) we could see a fairly-valued Merck price closer to $41 than $44, in the next few weeks, on the NYSE. Of course, you should do your own diligence here.

Now let's wait to see what happens. [BTW, I am not long or short in any of these companies at the moment.]

Do stay tuned.

Friday, March 29, 2013

J&J's Invokana® Approved By FDA; "First In Class" Drug For Type II Diabetics


Now we wait to see where Merck opens, on the NYSE, on Monday. My very strong hunch here is that Invokana® will be a perhaps $5 billion franchise by 2016 or so. Some of that will logically come from Merck's Januvia®/Janumet® franchise.

UPDATE: I should make it plain that my estimates for early uptake of Invokana are perhaps as much as ten times higher than those being bandied about by most of the people whose day job is stock analysis. While there have been safety concerns with other candidates in this class, I think the post-marketing studies are going to vindicate Invokana. In addition to the superior efficacy profile here, the reported "side effect" -- of weight loss -- makes a pretty compelling uptake case. I think this drug will be called for by name, by the vast majority of Americans with obesity-triggered Type II diabetis. That's called patient pull-through -- and when it occurs, the sales ramp accelerates significantly.
Stay tuned -- but here is Larry Huston -- writing for Forbes:
. . . .The FDA said today that it had approved canaglifozin (Invokana, Johnson & Johnson), the first of a new class of diabetes drugs known as sodium-glucose co-transporter 2 (SGLT2) inhibitors. Canaglifozin is indicated to improve glycemic control in adults with type 2 diabetes in conjunction with diet and exercise. The drug has been studied as monotherapy and in combination with other common treatments for type 2 diabetes including metformin, sulfonylurea, pioglitazone, and insulin. . . .
Have a safe and peaceful holiday weekend.

Nearly A Decade Later, The Hassan-Cox Led Pharmacia Securities Class Action Nears A Trial Date


Although it will likely be Pfizer -- a Merck competitor -- that pays all these legal bills (less any remaining D&O insurance), and ultimately pays any resulting securities damages tab for Fred and Carrie here, I must note that a federal court judge just denied efforts by the former Pharmacia defendants (and the Pfizer ones, too) to avoid a federal securities class action trial. The final pretrial conference is set for July 5, 2013. Judge Swain has encouraged the parties to settle, and avoid all the uncertainties inherent in a trial of this magnitude -- but Pfizer is presently saying it will try the case.

My background on Mr. Hassan's, and Ms. Cox's, roles in these matters is here. The more general context surrounding the largest criminal fine ever paid in a pharmaceutical marketing case is here.

The allegation is that Hassan, Cox, and others conspired to delay the release of complete study results -- results which harbored an adverse cardiovascular safety signal. As a result, the US medical community condemned Pharmacia’s touting of the CLASS Study results -- based on partial data rather than the complete data set. Dr. M. Michael Wolfe, a Boston University gastroenterologist who praised the initial CLASS results, said he was “flabbergasted” and “furious” that he had praised a study based on incomplete data, which made him look “like a fool.” In a similar vein, JAMA’s editor, Catherine D. DeAngelis, admitted to being “disheartened to hear that they [Pharmacia] had those data at the time” the manuscript of the article was submitted to JAMA. She stated she was “very upset when I found out that they had a full year’s data.” Likewise, JAMA deputy editor Drummond Rennie stated that Pharmacia, as well as the study’s authors, “were not open with us.” T. Burton & G. Harris, Note of Caution: Study Raises Specter Of Cardiovascular Risk For Hot Arthritis Pills -- Vioxx and Celebrex Marketers Dispute the Research, Sought to Downplay It -- A Spurned Appeal to JAMA, The Wall Street Journal Aug. 22, 2001 at A1.

Later studies confirmed the now well-recognized fact that Celebrex® presents an increased risk of cardiovascular injury. A 2006 study reported that Celebrex doubles the risk of heart attack. B. Caldwell, S. Aldington, M. Weatherall, P. Shirtcliffe & R. Beasley, Risk of Cardiovascular Events and Celecoxib: A Systematic Review and Meta-Analysis, J. R. Soc. Med. 2006; 99:132-40 (March 2006). One of the authors of that study, Professor Richard Beasley, told Reuters that the cardiovascular risk was common to the entire class of drugs known as COX-2 inhibitors. That, as I said, led US Attorney Michael K. Loucks, of the Justice Department's Health Care unit in Boston, to seek, and recover, the largest criminal fine ever assessed in a pharmaceutical case, against Pfizer, the company which inherited Fred Hassan's jaw-slacking mess.

Here's a bit from the Reuters story, then -- do go read it all:

. . . .While dismissing some of the claims, U.S. District Judge Laura Taylor Swain in Manhattan said a reasonable jury could find that Pfizer and several top executives intended to mislead shareholders about the drugs' cardiovascular risks.

". . .The record is replete with evidence that defendants recognized that Celebrex and Bextra had associated cardiovascular risks, that such risks would be considered material by investors, and that defendants nonetheless misrepresented and actively concealed these risks," she wrote. . . .


And so -- it was with a deep ironic sense that I watched Fred Hassan's video interview, on CNBC with the useful idiot Jim Cramer, yesterday -- way up on the cable dial. Hassan is out flogging a book he wrote about reinventing corporate cultures. Upjohn, Pharmacia, Schering-Plough, Avon and most recently, Bausch + Lomb. This Hassan quote in particular -- simply dripped with ironic meaning, given what has actually happened at each of those companies:

. . . .Fred Hassan: Jim, you said that before and I fully agree. any stock before you invest in it, look at the CEO. Look at the person's authenticity, sense of direction, willingness to make the sacrifices and to be a leader and to get the people to move in the same direction. If you don't see those qualities, I would not invest. . . .


No -- but he'd gladly take nearly a quarter-billion dollar pay package, all in, to bust it up, it would seem.

I think -- when it's all done -- about ten years' time from now, history will judge Fred Hassan as one of the greatest destroyers of enterprise value in American public company history. Already the tab -- in damages -- at various companies he ran, has exceeded $4 billion, while taking nearly a billion dollars in pay for himself, and his teams -- over the past 20 or so years, at at least four companies.

Thursday, March 28, 2013

Interesting Merck NYSE Chart Action -- Around 11 AM EDT Today


We will see where Merck closes, but at the moment, it is off a fair bit -- from yesterday's NYSE close.

This may be a bit immodest, but throughout the mid-morning hours this morning, Merck had been steadily rising on the NYSE, and on pretty solid volume, too.

Then, at 10:55 a.m. local New York time, I published the FDA/J&J Invokana® speculation, in the immediately-below post. The $5.8 billion franchise Merck runs -- in Januvia®/Janumet® -- would clearly be impacted, and as soon as the next quarter, should FDA vote to approve Invokana, tomorrow evening.

Now look at the day's chart (thus far), courtesy Yahoo! stocks:



I have searched, and seen no earlier -- or contemporaneous -- mention of the likely Merck/Januvia impact, here. In addition, my traffic spiked in the 11 am to Noon time frame, Eastern -- much of it from in and around Manhattan. I'll name no names -- but all the usual Wall Street firms' IP backbones were well-represented. Highly entertaining.

Now, we wait for tomorrow's FDA approval action -- or complete response letter.

Important News Due From FDA Tomorrow Afternoon -- J&J's Invokana®, Januvia® Competitor?


Late in the afternoon tomorrow, after the markets have closed early -- for Good Friday -- we ought to learn whether the full Commission of the US FDA has voted to approve J&J's canagliflozin candidate, a first-in-class SGLT2 inhibitor, for Type II diabetis treatment.

In January 2013, the Advisory Panel voted to recommend approval, to the full Commission.

To be branded as Invokana®, the J&J drug -- if approved -- will go head-to-head with Merck's Januvia® franchise. That overall diabetis market -- worldwide -- is estimated at about $24 billion this year, growing to $36 billion by 2017. At present, the Januvia/Janumet franchise generates about $5.8 billion worldwide, in annual sales for Merck. If approved, over the next 24 months, I would expect to see Merck's sales flatten out, and perhaps even begin to decrease a bit -- back to around the $5 billion a year level, as Invokana ramps up -- to about $500 million per year in sales by mid-2014 or so. Longer term, and this is simply a guess, Invokana could be a $4 billion a year franchise for J&J -- into 2016 and beyond.

Why? Because earlier, Invokana soundly beat Januvia in a 10,000 patient head to head trial, for efficacy. It must also be noted, however though, that another maker's drug, in this new class of SGLT2 inhibitors, showed a cardio-vascular safety signal. Thus far, that signal hasn't appeared in any significant way in J&J's Invokana candidate. So, it will be an interesting horse race, as Invokana seems not to be associated with the weight gains diabetics experience -- while on Januvia (and the rest of the current class of medicines).

We will -- of course -- cover the full FDA's decision, right here, tomorrow afternoon.

That Was Quick! Both WSJ And Huff Po Carry Updated News -- On Tennessee's Non-Expansion


I'll not belabor the point in any great detail, but Monday morning, I wrote a piece excoriating Tennessee Governor Haslam -- for failing his poorer constituents, and dragging his feet on accepting the federal money available for Medicaid expansion in his state.

Overnight, he has put forward a plan to essentially "privatize" the federally earmarked Medicaid expansion money, for his state. It must be noted that at least some of his "plan" is pure political theater, as he immediately pointed back at the federal government, as the source of his local problem -- by essentially saying Medicaid ought not be covering these poorest Tennesseeans. He seems to think being given federal money for his poorest citizens is, in some ill-defined way. . . wrong.

As both the WJS and the Huff Po note, Governor Haslam, a Republican, is seeking Mr. Obama's concurrence that he be allowed to use the Medicaid expansion money to purchase private health insurance -- in an exchange-style marketplace -- for people in Tennessee who are at or below 133 percent of the poverty line.

The trouble with Governor Haslam's latest idea is that it -- at its core -- attempts to make a profit off of providing health care to Tennessee's neediest citizens. [It is thus a bone thrown to the private health care insurance lobbyists in Tennessee, to boot!]

The central premise of HHS's Medicaid expansion is that -- at least for the poorest Americans, i.e., those eligible for Medicaid -- it may not be possible to provide adequate levels of privately-insured care, and still make a profit, at the insurance company-level. That has long been true. Then, what is highly-likely, under such a "plan" -- is continual cut-backs in levels of covered care. That is a reality he won't mention.

So, should these plans move forward -- as is the case with plans proposed in Ohio and Arkansas (also states with Republican Governors) -- Health and Human Services Secretary Sebelius would have to be very vigilant in insisting that the private coverage equal or exceed that available under Medicaid. That means no "creeping" co-pays, or well-doctor visit co-pays. In short, it will (in my experienced opinion) return these states to a "bob-and-weave" health care delivery non-system, for these states' poorest citizens.

Here is a bit of the fine Huff Po article -- do go read it all:

. . . .Haslam said during an address before a joint session of the Tennessee Legislature. . . . "I'd like to put in place a program to buy private health insurance for Tennesseans that have no other way to get it than by using the federal money."

Obama's health care law seeks to expand Medicaid to anyone earning up to 133 percent of the federal poverty level, which is $15,282 for a single person this year, but states can opt out. The chief executives of 25 states and the District of Columbia have declared their support for the Medicaid expansion, while more than a dozen Republican governors have ruled it out.

Under the health care law, the federal government will pay the full cost of enrolling these newly eligible people from 2014 through 2016, after which the share would gradually decline until it reaches 90 percent in 2022 and future years. . . .

Despite outlining his proposal, Haslam told legislators he wouldn't push them to move forward absent an OK from the Obama administration that would guarantee the state's access to new federal dollars. . . .
The good and compassionate people of Tennessee ought to demand better of their Governor -- and legislature. I will kep the readers posted on this -- as it develops. [Obviously, broader, deeper coverage would benefit Merck, and all of pharma -- but especially so, the generic drug manufacturers. That is why I follow it.]


US Judge Bartel Unsurprisingly Holds No Libel In The Word "Unfounded"


Several of the "inside the legal industry" papers are carrying subscription only stories tonight, on this picayune squabble, so I'll mention it, and give away a free link to US District Court Judge Harvey Bartel III's fine memorandum opinion (an eight page PDF file), to boot.

Under US law, statements of one's opinions, if couched in terms of an opinion, are rarely libelous. Doubly so when a lawyer is offering his opinion on whether an allegation of overbilling is meritorious, after an investigation has been conducted. Triply so, when all the lawyer is doing is responding to allegations about, and demands made upon his client by a third party. It is thus entirely unsurprising that the very-able Judge Bartel, sitting in the Eastern District of Pennsylvania, held -- as a matter of law -- that a lawyer's statement that these allegations of overbilling were "unfounded" could not support any charge of libel.

I also decided to discuss it because it appears that at least some of the dispute revolved around the fact that legacy Schering-Plough had engaged market research Team A, while legacy Merck was using market research Team B. The plaintiff in the libel action was Team B, prior to the merger/bust-up of  Schering-Plough/Merck. Then, as merger time approached -- and it became clearer that the post-merger Merck (through legacy Schering-Plough people it kept on staff) was likely to use Team A for this sort of market research -- the plaintiff joined Team A, and agreed to be the agent of Team A, on a market research project called the Cogent project.

When the Cogent project was completed, Team A released the plaintiff (but Team A continued to get work from New Merck). The plaintiff apparently alleged that Team A overbilled Merck for part of the Cogent project. Merck had its lawyers look into the matter, and they determined that the claim of overbilling lacked adequate evidence of wrongdoing.

And so, the lawyer's letter, answering a letter from the plaintiff, and stating that Merck believed the allegation of overbilling was "unfounded", became the basis upon which the plaintiff claimed that Merck had libeled him.

That claim has now been summarily dismissed by Judge Bartel -- here's a bit of his:
. . . .Under 42 Pa. Cons. Stat. Ann § 8343, the plaintiff must prove "the defamatory character of the communication." As an initial matter, however, the court must determine as a matter of law if the statement is capable of having a defamatory meaning. If not, the claim must be dismissed. . . .

[Merck's lawyer] was simply answering [the Plaintiff's] letter. He did so in a thoughtful and temperate manner. He was providing [the Plaintiff] with the result of the investigation that [the Plaintiff's] letter had initiated. . . .

The case before us is similar to the circumstances in Beckman, 419 A.2d at 585. That lawsuit involved a communication reporting on the decision of a University History Department committee finding a graduate student's performance on an oral examination to be "inadequate." The Superior Court concluded that the communication was not capable of being defamatory. . . .
I suspect this will end Merck's involvement in what was originally a termination of employment case -- at a third party contractor. To provide balance, I will also upload a copy of the plaintiff's pro se complaint, here. Feel free to read it, along with the judge's opinion dismissing it.

Wednesday, March 27, 2013

Supremes' Pharma "Reverse Payment" Cases: Lawyer For The DoJ/FTC Offers Excellent Clarity


On this past Monday morning, Malcolm L. Stewart, the current Deputy Solicitor General for the Department of Justice, handled the FTC's oral argument very ably, I think. At the end of the argument, using his previously-reserved five minutes, he succinctly explained that -- in effect -- it is the consuming public that is being forced (without any say in the matter) to "kick-in" to help reach agreement, in almost all of these "reverse payment" branded/generic drug patent settlements

The notion is that each of the branded "innovator", and the first-to-file generic "copier", seek payments that, in total, exceed what a natural market would produce as total market profits.

So (absent the "enhanced" payments) the two cannot seem to divide the market pie amiably (for each feels its slice is going to be too small). The solution the pair have hit upon in recent years, at least, is to subvert the Hatch-Waxamn process, and reduce overall competition (even though Hatch-Waxman explicitly intended to strengthen competiton, and reduce the prices consumers pay for life-saving medicines) -- at least for the 180 day exclusivity period -- forcing the public to pay extra during that time, and thus both the innovator, and the copier recover a windfall. [This is accomplished, the FTC claims, by the first-to-file generic copier agreeing to wait to enter the market, and the innovator reaping additional profits during the then-delayed-180 day window -- and then effectively splitting those additional profits with the copier -- at the expense of the consumer.]

Specifically, at page 55 of the oral argument transcript (that's a rather large PDF file), Mr. Stewart summed up -- in a simple example -- why these reverse payments are antithetical to our notion of promoting free market competition, in order to benefit the consumer.

. . . .[O]ur system encourages settlement, but not to the nth degree. And so, for instance, if you had two firms fighting over a million dollars and each firm decided internally, $600,000 is the least I will accept. If they stuck to their guns, the case couldn't be settled.
Now, if the public could be made to kick in an additional 200,000, then each of the firms could get its 600,000 and walk away content. But we don't pursue the policy in favor of settlement to that degree.
But that's essentially what's happening here. The way these payments facilitate settlement is by inducing the generics to agree to a later entry date by increasing the total pool of profits that are available to the two firms combined and thereby maximizing the likelihood that each firm will find its own share of the profit satisfactory. . . .
We now await the reading out of the opinion(s) -- probably early in this coming summer -- but the above crystallizes the FTC contention nicely. It is certain that this sort of an agreement would violate the anti-trust laws, were it made in the oil industry, or in the tech industry. And that is telling.

This notion seemed to trouble Justices Sotomayor, Breyer, Ginsburg, Kennedy, Kagan and (to some extent) the Chief Justice -- Mr. Roberts. [That was essentially the line-up -- of the majority -- in the Obamacare/individual mandate cases, too, by the way.] We shall see -- but I would not expect that the court will hold such arrangements are presumptively (essentially always) unlawful. On balance, I would expect an intermediate level of scrutiny, to be articulated in some newly-announced test of the arrangements.

But as ever, these are merely guesses -- part of the fun of watching the Supremes is to make parlor bets about outcomes. So there is mine. Your mileage may vary. In fact, it probably does.





Monday, March 25, 2013

Solvay/K-Dur® Antitrust Cases: Supremes' "Body English" -- Speculation Edition


Well. . . the Bloomberg reporter present has it that the Supremes’ “Body English” suggested they might side with the FTC — and say that these arrangements are subject to close scrutiny under the Sherman and Clayton Acts.

The Bloomberg story suggests that some of the Justices’ questions hint that the brief by Representative Henry Waxman (D, CA) was well-received.

Rep. Waxman has been very-vocal, and public, in his opinion that Hatch-Waxman — a measure intended simply to reduce the cost of prescription medicines — has become a proxy-“highwayman” of sorts, allowing both the generic manufacturers and the branded innovators to get rich(er) by paying each other (depending on the circumstances) to delay competition from lower priced versions of the same compounds. And that might augur a win for the FTC here.

Having said all of that, though -- do recall that the Supremes appeared very skeptical of the ACA of 2010′s individual mandate.

And, yet it survived — as I long said it would, as a tax — to boot.

. . . .U.S. Supreme Court justices suggested they will open drugmakers to suits over so-called pay- for-delay agreements, hinting at a ruling that would rewrite the rules governing the release of generic medicines. . . .

. . .[T]he justices voiced skepticism about the accords, which the Federal Trade Commission says cost buyers as much as $3.5 billion a year. The antitrust agency says brand-name drug companies are paying generic rivals to forestall low-priced versions of popular treatments.

U.S. Supreme Court Justice Anthony Kennedy Chip Somodevilla/Getty Images U.S. Justice Anthony Kennedy, often the court’s swing vote, suggested that brand-name drugmakers at least shouldn’t be allowed to pay generic companies more than the generic companies could expect to get by winning patent litigation.

U.S. Justice Anthony Kennedy, often the court’s swing vote, suggested that brand-name drugmakers at least shouldn’t be allowed to pay generic companies more than the generic companies could expect to get by winning patent litigation. . . .

The accords benefit the companies “to the detriment of consumers,” Justice Elena Kagan said. . . .
So — who really knows? [But the Justices are (now, mostly) of an age where maybe -- just maybe -- their own impending mortality affects these health care related decisions. Consider that the ACA plainly benefits the elderly, among many others -- so too, would the FTC's position: making generics available earlier to the Medicare/Medicaid populations.] We will keep a weather-eye on it, for you.

The Tennessee Health Care Experience: Cruelty -- In Its Capriciousness


I'll make only a few additional editorial comments: first, when access to health care is rationed in an arbitratry fashion, cruelty from the caprice is a natural and expected result.

Gentle readers, this is Tennessee's wart-covered face -- via its non-system of health care delivery. This, of course, is also what President Obama's Medicaid expansion funds -- for the states. It would ameliorate Mr. Casteel's hardships -- and with his, those of perhaps hundreds of thousands, very much like him.

The people of Tennessee should demand better of their Governor. He needs to take the expansion -- and end the cruelty of this "lottery". One should not have to gamble, in a lottery, to get basic health care.

Do go read it all, but here is a bit of The New York Times, overnight, on the topic (Mr. Casteel's image above is derived from an image accompanying the story. Non-commercial "fair use" and commentary, as well as transformative work defenses are all claimed.):


. . . .There are other hurdles, too. Applicants have to be elderly, blind, disabled or the “caretaker relative” of a child who qualifies for Medicaid, known here as TennCare. Their medical debt has to be high enough that if they paid it, their income would fall below a certain threshold. Not many people end up qualifying, but that does not stop thousands from trying.

“It’s like the Oklahoma land rush for an hour,” said Russell Overby, a lawyer with the Legal Aid Society in Nashville. “We encourage people to use multiple phones and to dial and dial and dial. . . .”

We will keep watching, to see if the Republican Governor of Tennessee, Bill Haslam, will wake-up, and make the right decision, for his people (as Florida's Rick Scott, Arizona's Jan Brewer and New Jersey's Chris Christie have). The world is watching, Governor Haslam. Here is a graphic -- for state by state analysis of where we stand:

Where the States Stand
Via: The Advisory Board Company


Sunday, March 24, 2013

First Federal Fosamax® Femur Case Now Set For April 8, 2013


And the beat goes on. Judge Joel Pisano has moved the date back a few days, due to the court's other calendared obligations.

In other federal Fosamax® case news, Shirley Boles, the ONJ plaintiff who originally won $8 million (subsequently reduced to $1.5 million by Judge John F. Keenan, in Manhattan) -- is now subject to a confidential settlement agreement.

In Rhoda Scheinberg's just recently completed ONJ case (she won $285,000) -- Merck has filed a motion for judgment as a matter of law, post the jury award, and has indicated if it loses that motion -- it intends to appeal to the Second Circuit Court of Appeals.

Thus, at the moment, Mrs. Scheinberg's lawyers are prevented from recovering their bill of costs related to the litigation, all as allowed by federal rules -- until the Merck appeal is decided -- even though they won -- at trial.

Here is a bit of that March 21, 2013 order, from Judge John F. Keenan in Manhattan:
. . . .Merck has filed a motion for judgment as a matter of law under Rule 50(b), which is currently being briefed by the parties. According to Merck, should its 50(b) motion be denied, it will file an appeal with the Second Circuit. . . .
No word yet, on when the next New Jersey state court Fosamax femur case will go to trial, now that Mrs. Su must recover from her heart attack before that case may be retried. I'll keep an eye out, though, just the same.

Saturday, March 23, 2013

UPDATED "Fast Fred" Hassan Chronicles -- Will Bausch + Lomb Price The IPO Above $29.11? We Shall Soon See.


Overnight, a newly-created Warburg Pincus-affiliated holding company filed IPO plans with the SEC's EDGAR desk (prior backgrounder here). I'll likely offer a few other posts in the coming weeks on this topic -- including how much of a haircut from the previously-desired $10 billion valuation the IPO investors will be accepting -- but let's keep track of this particular one, first.

Let's track how much true insiders were willing to pay for the B + L common shares, during the period it went "dark". That is, the period during which it was a private company -- and not making public SEC reports. That's from October 2007 to and including yesterday's trading on the NYSE. [B + L had been shopping itself around, with a $10 billion asking price in early 2013, with nary a serious nibble -- at that price.]

At the time the offering is ultimately declared effective (and Bausch + Lomb returns to the NYSE), the company's name will become Bausch + Lomb Holdings Incorporated. At about the 358th page of the overall SEC Form S-1 registration form, we learn, on page II-2 -- at essentially the very end of the filing, that directors, officers and employees have, over the past three years, been granted/bought private common shares at an implied $29 price:
. . . .(1) As of March 1, 2013, under our Management Stock Option Plan (“MSOP”), we had outstanding stock options to directors, officers and employees to purchase an aggregate of 14,134,254 shares of common stock with a weighted average exercise price of $23.37 per share and had issued 580,784 shares of common stock for an aggregate purchase price of $11,648,427 upon exercise of options awarded under the MSOP.

(2) As of March 1, 2013, employees and directors have purchased an aggregate of 1,048,451 shares of common stock for an aggregate purchase price of $30,503,294. . . .

That math (in note 2, immediately above) works out to a non-weighted average price of about $29.11 per share purchased by classic "insiders", while the company was private. That is, insiders were willing to pay $29.11 a share -- on average -- to own the private version of Bausch + Lomb. Keep an eye on that.

It is highly likely that -- just prior to IPO time, the underwriters will adjust the number of shares outstanding, in order to price the IPO between $15 and $30 per share -- to give the offering a "prestige" price handle.

When that happens, I will report the "as adjusted" price these insiders effectively actually paid -- post IPO repricing -- for these shares.

We will then see whether the insiders are seeing an implied gain on the IPO, or an implied loss. And we will see whether the $10 billion asking price from early 2013 was ever anything other than a pipe dream. [About 3.3-times sales ($10 billion/$3 billion in 2012 sales) for a company with this much debt -- and these thin margins -- seems pretty far beyond the pale, in today's markets, in my personal opinion.]

Finally, Fred, Brett and Bob will see all the existing stock options repriced, and many of them cashed out, here prior to the IPO -- all dressed up as financial arrangements in respect of a $774 million cash dividend Warburg has paid itself, out of B + L, via bank borrowings, effective March 15, 2013. This is disclosed in the second paragraph found on page 4 of the prospectus.

At the moment, Mr. Hassan controls 296,957 shares, and Mr. Saunders 841,649 (he's the nominal CEO of B + L, now). The new hire of the bunch, Mr. Bertolini controls only 232,000 shares (these numbers are likely to change significantly by IPO time). That is the core of the legacy Schering-Plough team now running the private version of Bausch & Lomb.

Do stay tuned -- "Fast Fred" never leaves a dime on the table, when it can be swept up for him -- and his co-horts -- in these transactions. I'll keep you informed.

Friday, March 22, 2013

Oral Arguments Monday -- Pay For Delay Case Before The Supremes


Monday's "Oyez. . . Oyez" session formally involves a legacy-Solvay Labs, now AbbVie low-testosterone treatment called AndroGel®. But the implications of this argument will likely set the course for the legacy Schering-Plough (now New Merck) franchises subject to similar agreements.

To oversimplify a bit here, the patent laws and the antitrust laws set up conflicting goals: patents are essentially legally-supported monopolies, for a period of time (how long the period should be is the crux of the debate) -- and the antitrust laws declare that almost all monopolies are presumptively unlawful. And so, private agreements paying generic competitors money not to challenge the length of the branded pharma patent(s) look more than a bit like agreements to continue monopolies -- beyond what the patent statute originally envisioned as the monopolies' end-date(s).

Afterall, the original legacy Schering-Plough K-Dur® 20 patent (the '743 patent) is now almost 24 years old. The typical outside date term for such a patent is 17 years. Moreover, K-Dur is simply a potassium chloride crystal, coated to dissolve slowly in the gut. While I do admire the 1980s era ingenuity it took to create the drug, nearly 24 years seems more than long enough to recoup the R&D, plus book a massive profit stream.

Here is -- by way of background -- the Third Circuit's July 2012 K-Dur full opinion, holding such arrangements potentially violate the antitrust laws. That sets up a clear conflict between the federal Circuits, and thus -- come Monday -- the Supremes will ask questions, and hear argument, aimed at deciding which Circuits' analyses make for the better balancing of policies, overall. Here's a bit of the July 2012 K-Dur opinion:

. . . .After consideration of the arguments of counsel, the conflicting decisions in the other circuits. . . and our own reading, we cannot agree with those courts that apply the scope of the patent test. In our view, that test improperly restricts the application of antitrust law and is contrary to the policies underlying the Hatch-Waxman Act and a long line of Supreme Court precedent on patent litigation and competition.

First, we take issue with the scope of the patent test’s almost unrebuttable presumption of patent validity. This presumption assumes away the question being litigated in the underlying patent suit, enforcing a presumption that the patent holder would have prevailed. We can identify no significant support for such a policy. . . .

Rather than adopt an unrebuttable presumption of patent validity, we believe courts must be mindful of the fact that “[a] patent, in the last analysis, simply represents a legal conclusion reached by the Patent Office.” Lear, Inc. v. Adkins, 395 U.S. 653, 670 (1969). Many patents issued by the PTO are later found to be invalid or not infringed, and a 2002 study conducted by the FTC concluded that, in Hatch-Waxman challenges made under paragraph IV, the generic challenger prevailed seventy-three percent of the time. . . .

Additionally, as the experience of at least one court in this Circuit confirms, the high profit margins of a monopolist drug manufacturer may enable it to pay off a whole series of challengers rather than suffer the possible loss of its patent through litigation. . . .

Specifically, the finder of fact must treat any payment from a patent holder to a generic patent challenger who agrees to delay entry into the market as prima facie evidence of an unreasonable restraint of trade, which could be rebutted by showing that the payment (1) was for a purpose other than delayed entry or (2) offers some pro-competitive benefit. . . .


We will, of course, keep you posted on the implications of the Supreme's "body English" after Monday's Solvay arguments -- as time permits.

Wednesday, March 20, 2013

Matt Herper Notes That Dr. Perlmutter's Boldness (While At Amgen) May Now Benefit Merck


Matt Herper, writing over at Forbes, offers a very cogent window into what will likely turn out to be a very smart move by New Merck CEO Ken Frazier, in bringing Dr. Roger Perlmutter back to Whitehouse Station. It seems one of Perlmutter's boldest bio-tech bets while at Thousand Oaks is about to pay off, large, in the melanoma arena. Perlmutter led the team that evaluated the purchase (by Amgen) of BioVex, in 2010-2011.

He was very thorough in his diligence -- and still made the bold move to acquire that company's talimogene laherparepvec "payload" program (housed in a genetically-modified herpes simplex type 1 virus "carrier") -- for over a billion dollars.

Do go read all of Matt's piece, but here is a bit:
. . . .Amgen purchased the company that developed the virus, Biovex, in 2011 for $425 million in cash and a commitment to pay up to $575 million if Biovex’s medicines hit certain milestones. If the Biovex anti-cancer virus is indeed a potent cancer fighter, it could help get investors excited about Amgen. It might also benefit Merck, because Amgen’s former research chief, Roger Perlmutter, has just agreed to take over running the research labs there, and this might reflect on his ability to make smart acquisitions.

In an interview in 2011, Perlmutter praised the Biovex researcher who had developed the virus. “Robert Coffin has done a really good job of developing this particular oncolytic virus,” he said. He told me that “you can’t doubt that the administration of the virus is having an effect” — I was skeptical — and promised “we kicked the tires on this very hard. . . .”
This kind of measured yet bold risk-taking may be just what the doctor ordered -- for the new Whitehouse Station.

Tuesday, March 19, 2013

BREAKING Sad News: Plaintiff In First Fosamax® Femur Bellwether Suffers Heart Attack; Judge Higgins Declares Mistrial


We send our genuine wishes for a speedy and complete recovery to Mrs. Su and her family -- but it is clear that she won't be able to testify at her trial, so a mistrial is the only option.

This is also bad news for Merck, as it spent considerable money and energy in preparing for this case. The trial was nearly half over, as well. Again -- Mrs. Su's health is the overriding concern, here. [I do think we are the first blog to report this, as a breaking-story, this morning (background on the case, here and here).]

I'll look for additional background, here, but this is from the free portion of the subscription only Law 360 outlet:

. . . .Superior Court Judge Carol E. Higbee took the bench to declare a mistrial after attorneys informed her that plaintiff Christina Su had suffered a heart attack Sunday night, leaving her in no condition to continue with the trial. Su’s case was the first of more than 2,000 pending cases in New Jersey state court. . . .
This means another case will need to be selected -- and added to the subsequent calendar of three bellwethers, total, in New Jersey state court. Most likely, the next trial there will be the second one in order on the docket. A new bellwether case will be added to the end of that docket.

Before that one, though, the first federal court Fosamax® femur bellwether trial will get underway in Newark's US District courthouse before the very able Judge Joel Pisano on April 8, 2013 -- Glynn v. Merck. In the aggregate, combining femur and ONJ case totals, there are over 7,800 cases pending, now. We will keep you informed.

Monday, March 18, 2013

The Founder Of Merck's First Large Generic Challenger Returns To The Infinite


Over the weekend, a towering figure in what became the generic drug industry returned to Infinity. Dr. K. Anji Reddy, the founder of the public company called Dr. Reddy's Labs and based in India, is no more.

Back in 1985, Dr. Reddy launched the first generic challenger to Merck's vaunted anti-hypertension franchise -- in the form of a chemical called methyldopa (C10H13NO4). I've long-since forgotten the brand name under which Merck sold the drug (help me out here, readers! UPDATE: Bonus points to the erstwhile Salmon -- see comments -- the drug was branded as Aldomet -- perfect!), but it was plain that Dr. Reddy aimed to shake up the global markets for all sorts of drugs -- and that is precisely what he did.

Here's a bit of the Bloomberg obit, from Sunday -- do go read it all:

. . .K. Anji Reddy, the founder of Dr. Reddy’s Laboratories Ltd. (DRRD), India’s second-largest drugmaker, died Friday after “ailing for some time,” the company said. . . .

. . . .In 1985, Reddy started making methyldopa, an off-patent hypertension drug that Merck had discovered. A year later, Reddy listed his company on the Bombay Stock Exchange and four regional exchanges by selling 1.1 million shares to the public. Reddy’s passion for research led Dr. Reddy’s taking up drug discovery research in 1993 and was the first pharmaceutical company in India to initiate basic drug discovery research. . . .

Oh my. The stories I might tell, from those heady times. . . truly, I was but a pup. . . but suffice it to say that the Infinite has been enriched, by his return to it -- just as our planet was enriched, by his all-too-brief visit to it. Sincerely, Namaste, Dr. Reddy!

Friday, March 15, 2013

Legacy S-P's Bridion® Delayed. Again. And Again. And Again.


I've been reporting on the highly-likely -- and later, actual -- delays related to legacy Schering-Plough's Bridion® drug candidate, in providing the data required to secure US FDA approval, since at least December of 2008. Today's FDA news brings yet another. Yawn.

[Bridion has turned out to be only a very modest performer, for new Merck, selling about $260 million in 75 countries, other than the US, in 2012. It was once the first among Ex-CEO "Fast" Fred Hassan's Five Stars in late 2008, though.]

Per Reuters, then -- do go read it all:

. . . .The U.S. Food and Drug Administration will not complete its review of Merck & Co's experimental medicine to reverse the effects of anesthesia until the second half of 2013, representing a three-month delay, the drugmaker said.

Merck acquired the product, called sugammadex, through its merger in 2009 with Schering-Plough Corp. The product has faced numerous regulatory delays. . . .

The FDA in 2008 said it could not approve sugammadex until Merck provided more clinical trial data related to allergic reactions and blood clots, possible side effects of the drug. . . .
So, all in -- that's at least five years of delays, here. We will keep you posted, but I'd not expect FDA communication before December of 2013, now. Either way, it is not material to New Merck's nearly $50 billion in annual revenue. And so it goes.

Thursday, March 14, 2013

FDA Offers Communication On Januvia® -- No Reason To Be Alarmed, In My Opinion


We have been following this set of stories since 2009, as regular readers know. And I think Merck will be okay, here -- I think its Januvia® franchise will be just fine. This same unpublished data was covered by this last post of mine -- prior background, here.

While it is always possible that some surprising pre-cancerous cells finding will turn up, I wouldn't think it probable, at this point. Moreover, if it involves Merck's Januvia/Janumet franchise -- it is likely to involve the entire class of these drugs. And so, all ships in the harbor will rise and fall with the same tides.

Again, it is responsible science to monitor and evaluate all new data, at FDA -- but I wouldn't be an alarmist here. The pre-cancerous cells scare is likely just that -- a scare, not a signal.

I am quite-likely the last man on Earth to consider drinking any Whitehouse Station Kool-Aid, but I do know it takes many months to sort these things out (I am a man of science, afterall). And FDA has previously reviewed reams of data on this class of drugs. The putative cancer signal was all but ruled out, back then. There is little reason to expect anything terribly different, this time.

Just the same, here is the FDA's announcement of this morning:

. . . .FDA has not reached any new conclusions about safety risks with incretin mimetic drugs. This early communication is intended only to inform the public and health care professionals that the Agency intends to obtain and evaluate this new information. FDA will communicate its final conclusions and recommendations when its review is complete or when the Agency has additional information to report.

FDA previously warned the public about postmarketing reports of acute pancreatitis, including fatal and serious nonfatal cases, associated with the use of the incretin mimetic drugs exenatide1 and sitagliptin. A recently published study that examined insurance records also found the use of exenatide or sitagliptin could double the risk of developing acute pancreatitis. The Warnings and Precautions section of the drug labels and the patient Medication Guides for incretin mimetics contain warnings about the risk of acute pancreatitis. . . .


As ever, we will keep an eye on this -- but I would not be terribly alarmed here. All of this has been known in some form, for some time -- so the NYSE downdraft in Merck's stock is likely an overreaction, in my opinion.

Merck Has Been Enrolling Mild To Moderate Alzheimer’s Patients -- In MK-8931 Phase II Study Since December 2012


And so, it makes sense that, as of Wednesday, Merck had signed up a collaboration and license agreement with Luminex, to allow Luminex to build a companion diagnostics device -- one dedicated to measuring the levels of two candidate biomarkers (Aβ42 and t-tau) in cerebrospinal fluid samples from likely Alzheimer’s patients with mild to moderate cognitive impairment.

The goal of creating such a device, of course, is to quickly assess whether a given likely Alzheimer’s patient is a suitable candidate for the now-enrolling Phase II clinical trial -- and to establish baseline (and post treatment) levels of the two biomarkers.

Here is a bit of yesterday's press release on the matter:
. . . .Luminex will be responsible for development, regulatory submission and commercialization of the candidate companion diagnostic device, which will employ Luminex’s xMAP® Technology to measure concentrations of two candidate biomarkers (Aβ42 and t-tau) in cerebrospinal fluid (CSF) samples from patients with mild cognitive impairment (MCI). The candidate device will be evaluated as a means to identify subjects with MCI who have a higher risk of developing AD to support patient selection for Merck’s therapeutic BACE inhibitor clinical program.

“This collaboration has the potential to deliver a novel companion diagnostic to identify patients at increased risk of developing Alzheimer’s disease,” added Patrick J. Balthrop, president and CEO of Luminex. “We are pleased to leverage our technologies and development capabilities and look forward to expanding our activity into the companion diagnostic segment of personalized medicine. . . .”

This is the sort of bold risk Mr. Frazier said Merck would take, under his stewardship. I applaud it -- with these sorts of "big science" risks, more than occasionally come big market rewards. To be sure, there will be bumps in the road, along the way -- but Alzheimer’s may be one of the largest remaining great white whales in the deep blue, out there. We just know so little about it. . . This Phase II trial will likely not be completed until late 2017.

And so -- here's to the process of discovery! Let us all hope it leads to relief from the dread disease called Alzheimer’s.

We will keep you posted.

Tuesday, March 12, 2013

Jury Has Been Empaneled; Opening Statements Completed In Su Fosamax® Femur Case


I'll simply note that this trial is likely to last a few weeks -- and when the case is handed to the jury -- we will let you know. I'll not do any more day-by-day reporting on it, unless something truly jaw-slacking occurs. [Here is a bit of background on it, for a more complete look at the issue.]

From the New Jersey Star Ledger, this evening, then:

. . . .Researchers said in 2010 that Fosamax and competing bone-loss drugs may be linked to increased risks of thigh-bone fractures. As many as 94 percent of 310 patients who had an uncommon type of fracture to the thigh bone were also taking a bisphosphonate-based drug, according a September 2010 report in the Journal of Bone and Mineral Research. Most had taken the medicine for more than five years, according to the report.

Su, who lives outside New Brunswick, is a retired computer-systems analyst who took Fosamax for more than five years starting in June 2003, according to court filings. She suffered a broken right femur in 2009 and doctors later that year inserted a metal rod in her left femur to deal with stress fractures, according to the filings. . . .


Stay tuned.

I Am Adding 6 MORE Months To The IMPROVE-IT "Countdown Clock" (At Left Margin). . .


It will now complete in September of 2014 -- and results won't be known until near the end of the year 2014. And it may even be after that, as I've always said -- it may take months to discern what small effect is there, among the 18,000 patients.

I will take a moment to point out that ever since mid-2008, I alone have been reporting that there was no way legacy Schering-Plough could get definitive outcome results as early as Ex-CEO "Fast" Fred Hassan was telling Wall Street. And that was before the trial had to be "super-sized" (increasing the patient count to over 18,000), in order to see a statistically-significant outcome. [Here is the clinicaltrials.gov webpage for the IMPROVE-IT study, with a listing of the background history -- including changes to the trial design, at least as to the n studied.]

So, back when everyone inside Schering-Plough was predicting a 2011 read-out of IMPROVE-IT, I prepared the graphic at right, and started my 2014 countdown clock, at left.

On the Yahoo! stock chatboards, I took some abuse for these views -- and I welcomed it then, just as I am laughing now.

Why? Because, in my opinion, the effects to be seen (or not seen) in IMPROVE-IT (rate of CV events) are going to be very small -- if they exist at all. We need to see about 5,250 clinical endpoints (CV events) in the population of about 18,000 patients -- then we will see whether the Vytorin® treatment arm fared better than the overall population. Was the rate of strokes, heart-attacks, and other CV events reduced to a statistically-significant level, in patients taking Merck's drug? That is the question of the day.

So, honestly, I am laughing at the traders in the NASDAQ premarket this morning who are bidding Merck up five percent, due to this news. If it appears in late 2014, the effect seen in favor of Vytorin will be very small. Not worth a five percent pop, on a $50 billion per year company, today.  That's silly.

Let's see where the NYSE settles in at open. In the mean time, here's a bit of the Bloomberg story:

. . . .Vytorin, with $1.7 billion in sales last year, combines a generic cholesterol drug with Merck’s cholesterol drug Zetia, which generated $2.6 billion in revenue. Investors have been watching the trial after researchers found in 2008 that Vytorin may not provide a heart benefits.
The announcement “suggests no safety issues,” said Mark Schoenebaum, an analyst with ISI Group in New York, in a note to clients. “If Zetia, Vytorin were unsafe, would you be comfortable waiting another 18 months to look at the data?”. . . .
Again, as I have repeatedly-said, I do believe a null- or nearly-null-result in IMPROVE-IT is priced into Merck's stock at this time -- so a small pop would be logical, if a small effect is seen in favor of Vytorn, after the study is published. But anyone who thinks this is going to be a category killer, post IMPROVE-IT -- is, frankly, delusional. Just my $0.02.