Friday, May 31, 2013

While I Was Listening To Mr. Frazier at the Waldorf Astoria. . .


I'll note -- in passing -- what I saw pop up, on the EDGAR screen: Goldman Sachs and/or its affiliates are acting for, and advising on BOTH SIDES of the Valeant/Bausch + Lomb merger. The definitive commitment letter, and the merger agreement, were just filed this morning with the SEC on Form 8-K.

The crux of this anomaly -- in a deal of this size -- arises should fiduciary duties arguably require B + L to reject the Valeant bid, as against the interests of Valeant -- or the converse situation, where Valeant's board would arguably be duty-bound to reject the merger, due to material adverse events at B + L, or Valeant, or both.

Then -- in gluttony, there sits Goldman's bankers: on BOTH sides of the table -- with perhaps $180 million to $200 million in various fees at stake, should the deal not occur. True, Goldman will get a "kill" fee (one, from each side) -- a smaller payout -- if the deal doesn't close; but Goldman will reap much greater returns, if it closes the bridge and other lendings it is arranging for Valeant -- and thus the B + L deal, overall.

As I say, this is highly unusual -- seeing one bank, on both sides of a deal that approaches $9 billion. With circa 5X leverage (in pro forma 2013), this is -- in my experienced opinion -- more evidence that many people ("Fast" Fred plainly included here) may be pushing this just a little too far. Goldman is resurrecting the failed prior Valeant merger engagement of the first quarter 2013, in the form of this B + L deal -- and reusing much of its analysis, to get a very high-margin fee here.

These are matters the Valeant public stockholders ought to carefully consider: with all the world-class talent available to handle deals which approach $9 billion in price, why is it sound business judgment (at the board level of each company) to have the same bank, on BOTH sides? I. don't. get. it. [Unless there is more than meets the eye, here.] From the commitment letter, then:

. . . .In addition, please note that Goldman, Sachs & Co., an affiliate of GSLP and GS Bank has been retained by the Target [B + L] as the financial advisor (in such capacity, the “Financial Advisor”) to the Target in connection with the Acquisition. Each of the parties hereto agree to such retention, and further agree not to assert any claim you might allege based on any actual or potential conflicts of interest that might be asserted to arise or result from, on the one hand, the engagement of the Financial Advisor or GSLP and/or its affiliates’ arranging or providing or contemplating arranging or providing financing for a competing bidder and, on the other hand, our and our affiliates’ relationships with you as described and referred to herein. Each of the parties hereto acknowledge that, in such capacity, the Financial Advisor may recommend that the Target not pursue or accept your offer or proposal for the Acquisition or advise the Target in other manners adverse to your interests. . . .
And, oh. Nothing materially-new from the Bernstein conference with Merck in Manhattan, this morning.

Legacy Schering-Plough Director Patricia Russo Received Almost 5 Times More "No" Votes, Than Any Other Merck Director


Late this evening, Merck filed its SEC Form 8-K disclosing the results of the voting, at the annual meeting of shareholders, held on Tuesday morning.

There were scarcely any surprises -- save one.

Patricia Russo (backgrounder), the 2009 chairman of the legacy Schering-Plough Compensation Committee (along with Hans Becherer) -- the committee that proposed, and approved, nearly $235 million in total payouts to Mr. Hassan -- saw between four and 10 times as many no votes, as the other directors. For comparison, I'll include Mr. Frazier's totals:

. . . .Election of Directors:

Name | For | Against | Abstained | Broker Non-Votes

Patricia F. Russo | 1,925,742,542 | 236,445,900 | 6,655,627 | 377,182,887. . . .

Kenneth C. Frazier | 2,096,967,321 | 57,398,361 | 14,478,387 | 377,182,887. . . .
Wild. I suppose this could be a delayed S-P compensation complaint effect -- or, a proxy vote, on some action she took as a board member at one of her other public company seats (but I suspect this is related to her seat on the HP board).

We will scout around on this, tomorrow -- but here is her current bio: Lead Director, General Motors Company since 2010 and Director since 2009 (auto manufacturer); Director, Alcoa Inc. since 2008 (leading producer and manager of aluminum) and Hewlett-Packard Company since 2011 (a technology company). Ms. Russo was Chief Executive Officer and Director, Alcatel-Lucent from 2006 through 2008. She previously served as Chairman of Lucent Technologies Inc. from 2003 to 2006 and Chief Executive Officer and President from 2002 to 2006.

Thursday, May 30, 2013

ACA UPDATE: Federal Health Exchanges Are Spurring Insurer Competition, In Former Monopoly (and Duopoly) Markets


Contrary to what the Republicans errantly forecast last election cycle, the HHS health exchanges are driving new choices for consumers in markets where little choice (and thus little price competition) ever appeared.

In point of fact, it seems the Republicans were the ones defending monopolist, and douopolist markets in these states -- see graphic at right.

True enough, this is Mr. Obama's spin on how the exchange roll-out is faring, but the fact is that there are now private 13 insurers competing in the individual market in California -- where previously there were effectively only two -- tells us Mr. Obama was right, and the Republicans were wrong.

I do think this memo puts to rest the idea that Obamacare is a government take-over of health care insurance and delivery: 

. . . .Consumers in the individual market have long had only limited – if any – choice among plans.

In 2012, the individual insurance market was dominated by one or two different insurance companies in most States.

For example:

 In 11 States, the largest two issuers cover 85% or more of the individual market.

 In 29 States, one insurer covered more than 50% of all enrollees in the individual insurance market.

 In 46 States (including DC), two insurers covered more than half of all enrollees (see map).

 Most of the people expected to enroll next year live in States with limited health insurance choices.

 An estimated 85% of the 7 million people that the Congressional Budget Office (CBO) projects will enroll in the Marketplace in 2014 live in the 46 States where currently two insurers cover more than half of all enrollees.

 Unlike the current market – where people are often locked into a health plan due to their pre-existing conditions – starting in 2014, anyone can switch plans and, through the Marketplace, shop based on price and the level of coverage that fits their budget and needs.

 In 11 States, the largest two issuers cover 85% or more of the individual market.

 In 29 States, one insurer covered more than 50% of all enrollees in the individual insurance market.

 In 46 States (including DC), two insurers covered more than half of all enrollees (see map).

 Most of the people expected to enroll next year live in States with limited health insurance choices.

 An estimated 85% of the 7 million people that the Congressional Budget Office (CBO) projects will enroll in the Marketplace in 2014 live in the 46 States where currently two insurers cover more than half of all enrollees.

 Unlike the current market – where people are often locked into a health plan due to their pre-existing conditions – starting in 2014, anyone can switch plans and, through the Marketplace, shop based on price and the level of coverage that fits their budget and needs.
 New Choices for Consumers:

 The Marketplace is attracting new insurance choices and increasing competition for consumers, especially in States where it is really needed.

 The majority of States will have new health insurance choices that are not available today. The insurance reforms, coupled with premium tax credits, and premium stabilization programs, have made the Marketplace an attractive option for new entrants.

 In about 75% of the States with an HHS-run Marketplace, at least one new insurance company intends to enter the market and plans to offer individual market coverage.

 One out of every four insurance companies proposing to offer coverage next year in the HHS-run Marketplace has newly entered the individual market.

 About 65% of new issuer entrants to the individual market in the HHS-run Marketplace will be in States where only one insurance company dominates the market today.

 Multi-State plans will be offered in at least 31 States nationwide in 2014, with coverage expanding to all 50 States and D.C. no later than 2017. OPM is currently reviewing over 200 proposed Multi-State qualified health plan options. This type of plan offers similar coverage across State lines, and helps promote choice and competition.
Strong Competition:

 About 90% of target enrollees will have five or more difference insurance company choices – based on data from the 19 States with a HHS-run Marketplace and from other State-run Marketplaces that have publicly released information about their submissions.Together, these States represent an estimated 80% of the 7 million people CBO estimates will enroll in the Marketplace in 2014.

 While the number of issuers may change, today, over 120 issuers have applied to offer qualified health plans in the HHS-run Marketplace.

 Consumers will have multiple options in each tier of coverage: catastrophic, bronze,silver, gold, and platinum. On average, issuers plan to offer more than 15 qualified health plans per State, with some plans being offered in part rather than all of the State. . . .
We will keep you posted, as ever.

Further Vioxx® Chronicles: Federal Court Grants Plaintiffs Leave To Add To Class Complaint -- For A Sixth Time


The eminently capable New Jersey federal District Court Judge Stanley R. Chesler published an opinion (that's a 13 page PDF file) earlier today, in the 2004-'05-era Vioxx® Securities and ERISA Class Action, allowing the plaintiffs to add additional claims. This time, the added allegations point to misleading statements made (by Merck) in 2000, which -- it is claimed -- were designed to remove suspicions about the safety of Vioxx. Those allegedly misleading disclosures have been dubbed the "4% Statement".

You can read it all, by clicking this, or the above link -- but below is a bit:

. . . .[The Amendment would include]. . . allegations that Defendants falsely stated that the inclusion of a high-risk subgroup of patients in the VIGOR trial supported Merck’s claims that the results of the trial were attributable to naproxen’s purported cardioprotective effect (as opposed to Vioxx’s propensity to increase the risk of a negative cardiovascular event, or prothrombotic effect). In particular, Plaintiffs seek to add factual allegations that Defendants deceived investors regarding the safety profile of Vioxx by explaining that four percent of the participants in the VIGOR trial should have been receiving prophylactic aspirin therapy to prevent heart attacks and strokes and insinuating that these were the VIOXX-taking participants who suffered the majority of the heart attacks. . . .

The 4% Statement appeared in two publications. According to the proposed Sixth Amended Complaint, it was first made in a Merck press release dated May 24, 2000 and then repeated, in essence, in a November 23, 2000 article in the New England Journal of Medicine concerning the VIGOR study. . . .

In short, the Court concludes that amendment of the Complaint to add allegations concerning the 4% Statement satisfies the standard of Rule 15. As alleged, the 4% Statement, read in context, bolsters the naproxen hypothesis (Merck’s explanation of the VIGOR results as attributable to the cardioprotective qualities of naproxen as opposed to the prothrombotic effect of Vioxx) and thus relates to the core of Plaintiffs’ § 10(b) claim. For the reasons stated, the Court finds that Plaintiffs have sufficiently alleged that the 4% Statement is actionable under § 10(b) and Rule 10b-5. . . .


Of course, this is not a finding that the Plaintiffs have actually proved any of this -- it merely means that they may attempt to prove it, in court, at some future date. So -- net, net -- not material, at this point. On balance, in my opinion, it slightly increases the odds that Merck will need to settle this -- to avoid a "bet the company" type trial -- at some future point. We will keep you posted.

I Was Mistaken: Valeant/Bausch + Lomb Pro Forma 2013 Leverage Is More Like 5.8 To 1


I was wrong -- earlier today, I guessed that 2013 combined leverage would approach 5 to 1. It actually is approaching 6 to 1, even on management's own calculations.

Apparently, Valeant just filed an SEC Form 8-K, containing its slide deck for this morning's potential lenders' pitches.

Where I come from, there used to be a difference between "pro forma" statements and "projected" financial tables. Moreover, when one assembled pro formas that included "projected future savings" -- one used to call the resulting tables "pro forma projected" selected financials.

Take a look (click to enlarge) -- but 5.88 to one is very highly levered -- with neither company reporting GAAP EPS last year (due to their respective interest expense burdens):



Were I being asked to lend into this scenario, I'd be concerned that -- even using managment's own Total Debt to EBITDA figures, management has chosen to round down, from 4.7 to 1 -- to 4.6 to 1, when conventional rounding rules (actual math) would require 4.7 to 1 -- as the expressed ratio.

This, I think, is a warning sign -- of management, private equity players and investment bankers who are pushing just a little too hard.

To think the would-be lenders don't see right through them is. . . a little unsophisticated. These folks are only hurting their own credibility -- if their intentions honorable, and their hearts pure. And, if they intend to fleece anyone -- this is a red flag: beware.

Merck Chairman To Present At Bernstein In Manhattan, Tomorrow Morning


It is somewhat unusual for the Chairman/CEO to be the presenter at these things (though Mr. Frazier did so, last year, at Bernstein's conference) -- under the new Merck regime -- so this might be worth a more careful listen. I'll have a live blog window ready to go, should something material jump-off.

In any event, here's the presser:
. . . .Merck. . . announced today that Kenneth C. Frazier, Merck's chairman and chief executive officer is scheduled to present at the Sanford C. Bernstein 28th Strategic Decisions Conference in New York City on May 31 at 9:00 a.m. EDT. Investors, analysts, members of the media and the general public are invited to listen to a live audio webcast of the presentation. . . .
We will tune in -- and may live blog portions of it.

I'm Shocked -- "Fast" Fred To Join Valeant's Board Of Directors -- Simply... Shocked.


"Wait?! There's gambling going on in my establishment? MY establishment?!" I'm shocked. Simply shocked1.

Here is Valeant's deal press deck -- and while I've been waiting for Valeant's SEC Form 8-K, for more complete (and less puffed) disclosures on the topic -- according to the slide deck, Fred has been named. Apparently, he will join Valeant's board. [I wonder who will provide D&O insurance -- and at what premium rates.]

Yawn.

Probably my last set of observations on this overpriced, overly-levered deal: when Warburg Pincus took B + L private a few years back, its debt was a modest $820 million. Immediately prior to this deal, B + L's standalone debt weighed in at $4.2 billion (over a five-fold increase -- most of the last billion dollars of that used to pay Warburg Picus over $750 million in cash dividends). The interest payments on that debt-load were $246 million -- completely obliterating all the operating income B + L was then generating. The same story, only amplified by a more than doubling factor, has played out at Valeant: On March 31, 2013, Valeant's debt (immediately prior to the deal) stood at $10.4 billion. We will wait for the official SEC deal filing, but pro forma combined debt for the two companies may approach $14.8 billion -- on a company that may only have EBITDA of around $3.2 billion for the year 2013, on a pro forma basis.

So, debt to EBITDA (forget any GAAP EPS!) will approach 5-to-1 for all of 2013. [This item has been updated: it is closer to 6 to 1.]

Wait. Where have I seen this scenario before? Oh. Right. Dade-Behring, almost exactly a decade ago, now. Hey! Goldman, Sachs was a financier in that deal, too. Those ignorant of history are fated to repeat it.

Just the same, I wish Valeant all the best of luck. That combined management team -- with these moderate margin business franchises, aggressive synergies projections/targets (given that Warburg Pincus already pushed hard on the expense lines, from 2007 to 2013), and the combined, massive debt loads -- will plainly need it.

Put more bluntly -- $800 million of post-merger cash savings in 2014 seems improbable.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

1. To be clear, investing with these folks is -- in my opinion -- simple river-boat gambling. Nothing more.

Wednesday, May 29, 2013

Fiscal Fear-Mongering -- By Tennessee State Treasurer -- On Obamacare's Expanding Coverage Of Tennessee's Poorest Citizens


First, let's get the facts straight. The choice isn't whether Tennessee is shifting money away from college funding, to fund health care for the poor. By every credible estimate, without the advent of the ACA of 2010, Tennessee would be paying far more for its existing health care programs, from 2014 to 2020. So, to blame Obamacare for this is disingenous, at best. Tennessee has been allocating money away from educational subsidies for over three decades. That has absolutely nothing to do with health care reform -- it predates it by over thirty years.

In addition, the single most relevant fact -- one that is omitted by the Tennessee State Treasurer, in the below article -- is that the federal government is providing over 15 times as much as Tennessee itself is, to fund these programs, over the next ten years. This is a boon to Tennessee, from the federal government. It exists because it is immoral to force the poor into the most inefficient, and expensive delivery option -- ER services -- when we have the means to provide basic, cheap, effective preventative care, in Tennessee. [A large part of the problem, locally in Tennessee, is driven by the proliferation of for profit mega hospital chains -- that stridently lobby to avoid covering the poorest Tennessee citizens. But that is another series of posts, for another day.]

This is, in my opinion, the Tennessee State Treasurer simply trying to shift the blame -- for the shocking waste, in his own state health care delivery non-system -- to some mythical federal bogeyman.

Of course, this is all political theatre, to create cover for Tennessee's Republican Governor Haslam, who is still likely to refuse the federal Medicaid expansion from Obamacare -- jeapardizing the lives of hundreds of thousands of Tennessee's sickest and poorest citizens. [Background here, here and here.] Here is the local Jackson Sun, over the long weekend, on the topic -- do go read it all:

. . . .State Treasurer David H. Lillard said on Thursday that expanding health care costs could drive money out of other programs, including higher education programs, which would prompt officials to raise tuition rates.

“In higher education prior to 1990, the state paid greater than 50 percent of all costs and fees of state universities and community colleges,” Lillard said. “What occurred over time was a shifting of new money coming into the state budget system. Today, higher education probably gets something in the area of 38 percent paid by the state. . . .”

“You’re dealing with a situation where you can have a shift in priorities going forward,” he said. . . .

We find it ironic that Tennessee's Treasurer decided to argue that increasing coverage for poor people through the state's TennCare program will somehow mean fewer middle class kids will go to college.

Not only is that factually inaccurate, it is simply finger-pointing -- to deflect attention from the amount that the Tennessee state government wastes every year on ineffectual medicines and treatments -- see graphic at right. Tennessee is No. 2 or No. 3 in the nation, for waste of government medical expenditures -- over $1,440 per person per year. [Once again, the dominance of for profit hospital chains in Tennessee plays a role in this waste.] As the biblical adage suggests -- "take the beam from your own eye, before picking at the mote" -- in mine.

UPDATED | Okay -- let's do some math, here: If we were to set a goal for State Treasurer Lillard -- that Tennessee would end only HALF of the per person waste, per year, in TennCare -- or, $700 saved, per person per year (instead of $1,445) -- by better state fiscal management of the benefit-drug approvals. . . substituting generics for the branded names, etc., what would that look like?

Well, there are 1.2 million people on TennCare now, according to the state's own website. So, the Treasurer would have $820 million in new funds, if he acheived only 50 per cent waste reduction. At full waste elimination, he'd have a new $1.64 billion in available resources.

"Beams and motes," here, people -- the Treasurer estimated that Obamacare would cost an additional $200 million per year, in Tennessee -- we just found four times that amount, or $820 million a year. [Said another way, he only needs to eliminate one-eighth of the current TennCare waste, overall, to "break even," on Obamacare.] Note: it would be $1.44 billion a year, for new education subsidies, if he could eliminate all the waste -- even after he pays for Obamacare, by his own estimates. Q.E.D.

[Of course, all these same figures would (proportionately) appear, on a similar review of Mississippi, Florida and Arkansas, for certain. They would also likely appear in most of the states led by Republican governors who now oppose the expansion. Here endeth the sermon.]

Tuesday, May 28, 2013

Vioxx® Chronicles: At Federal Trial Court Level, Merck Learns Kentucky AG May Hire Contingent Fee Private Lawyers


UPDATED | 05.29.13 -- 4 PM EDT: It turns out that many a legal news outlet have found this story worthy of note. Two of the best are (1) this one, from The American Lawyer (founded so long ago, by Steve Brill), and (2) this one, from Pharmalive's Pharmalot -- Ed Silverman's right on point. Do read them both. [End, updated portion.]

Merck's counsel at Skadden, Arps had argued that using privately-retained contingent fee lawyers -- essentially to prosecute the Kentucky consumer protection enforcement actions -- resulted in improper incentives, and interfered with the impartial administration of justice in Kentucky. And so, it was argued that the private lawyers' employment (with a would-be "bounty" provision) was a violation of Merck's due process rights.

All of this transpired last year, in the Kentucky edition of the Attorney General's action to recover payments the state made to Merck, to buy Vioxx®, for patients in the Commonwealth.

Last Thursday (while I was busy with other matters), the very capable federal trial judge Danny C. Reeves issued a memorandum opinion holding that so long as the AG retained control over decision-making in the enforcement proceeding, it was no violation of Merck's rights to sign a contingent fee agreement with a private lawyer, where the AG's offices didn't have the resources to pursue the investigation adequately. That said, I expect that Merck will appeal the federal trial court ruling. We shall see.

Here is the 33 page PDF of Judge Reeve's opinion -- and a bit:

. . . .As long as the AG’s office is reviewing the contingency-fee counsel’s work before adopting or approving it — and Merck has cited no evidence in the record to convince the Court that it is not — the AG has retained and exercised his decisional authority.

The Court will not second-guess the AG’s decision to grant a certain amount of “room for the outside attorneys to. . . exercise their professional skills in putting a lot of [the litigation] together.” [Record No. 77-1, pp. 317-18] Because these decisions are “generally internal to the preparation of the litigation” and the AG does not allow outside counsel to dictate the direction or goals of the action, the arrangement has not violated Merck’s due process rights. . . .
And so it goes -- we will keep you posted if/when Merck files its notice of appeal. Net, net -- this just means Merck will face incremental refunds/damages in Kentucky, in this 2004-era litigation.

To be clear, I don't expect this single development will be in any way material to New Merck. [Prior background here, and here.]

Just As I Predicted -- On Heels Of Buyback & Parent-Only Debt -- Merck Upped: Price Target Now $54


As if dancing some elegant Austrian waltz, in perfect time, Jefferies & Co. has just twirled Merck around to a "Buy", and set a 52 week price target of $54. That's a major jump. [This is all as I said it would unfold, post the Apple-like moves of a few weeks ago.]

Per Yahoo! News:

. . . .Merck was upgraded at Jefferies to buy from hold. $54 price target. Stock is attractive, based on a sum-of-the-parts valuation, Jefferies said. . . .

Nice!

The fact that Pfizer has fetched nice multiples, and ahead of schedule, too -- for its full spin-off of its Animal Health businesses likely gives Merck yet another lever to pull, should the future for its pipeline dim significantly. That is the "between the lines" meaning Jefferies offers, in saying that the "sum of Merck's parts" justifies a higher stock price. Afterall, if Merck were to unlock that Animal Health value, via spinoff, it would be separately priced on the NYSE, as the argument runs. And the Merck shareholders would reap that benefit -- just as they are now reaping the stock buyback's benefits.

To be clear, though, Chairman Fraizer has said he plas to keep the businesses intact. Even so, it leaves Merck another arrow in its quiver, should a rainy day turn into a typhoon, in pharma. At least that's how Jefferies sees it.

Monday, May 27, 2013

Valeant Is STILL Likely Overpaying -- By 20 Per Cent -- For Bausch + Lomb


Well, it is now definitive -- and, to be clear -- we still have to wait to see where all the debt gets allocated, and whether the private equity holders (Warburg Pincus and friends) will share risk of loss/gain on Valeant's forthcoming $1.5 billion ot $2 billion equity issuance (to fund the deal, in part) -- but at $8.7 billion, it still seems about 20 per cent too rich. Valeant apparently hopes to cut S, G & A in half, but Warburg already gutted that mine, and Valeant forgets that the surgical business of B + L has high S, G & A needs.

In my opinion, Valeant must be thinking it will sell the surgical lines to pay down some debt. It cannot run the combined businesses, intact -- with as low as a 20 per cent S, G & A line, for the longer haul. Here is a bit of the Bloomberg story on it -- do go read it all:
. . . .Valeant will have about 18,000 employees once the deal is completed, Pearson said. The number of jobs that may be eliminated to reduce overlap and duplication hasn’t been determined, he said. Bausch & Lomb spends about 40 percent of revenue on selling, general and administrative expenses and Valeant aims for about a 20 percent ratio, Pearson said.

“There’s many, many non-personnel savings here as well,” Pearson said. “We can get better distribution fees in different markets. There’s a lot of purchasing synergies. There’s a lot of real estate synergies. . . .”


Pretty sad for the employees -- of both companies. No matter how the debt in the deal gets allocated, Alcon is still much larger than the combined companies, in eye-care. With Novartis behind the Alcon brands, and J&J also ahead of the combined companies in scale and scope -- this is a very tough road, ahead -- to win on price competition. The combined businesses just won't have J&J's, or Alcon's scale.

Saturday, May 25, 2013

My Mistake! The Rumored Price Is Three AND A HALF TIMES B + L's 2012 Sales Revenue; Over 20 Times 2012 GAAP Earnings!


I am sure that Valeant sees this as a pretty attractive possibility, but at 3.5 times 2012 sales (see page 8 of B + L's as-amended SEC registration statement, for its planned IPO), this is simply an overpriced deal. B + L's current and reasonably-expected product lines do not offer high-enough margins -- to justify that lofty buyout price. Early 2000s era four-times annual sales pricings have come. . . and gone -- for good.

Measured another way, on GAAP (not adjusted, non-GAAP) earnings (EBITDA, actually), this $9 billion price would be around 20 times B + L's 2012 earnings. Even the pure branded, high margin proprietary pharmas no longer command a 20 multiple. 12 to 15 would be a more realistic multiple -- even if this was a pure pharma. Bausch & Lomb is no pharma. It mostly sells sterile saline water solutions, for rewetting contact lenses, and the contacts themselves -- primarily. Those are highly commoditized business lines -- with many tough competitors in the space, well-entrenched. B + L's surgical line is newly acquired, and isn't really in its own wheelhouse (nor is it a core skill-set of rumored acquiror Valeant). And so, I'll say it yet again -- if this rumor turns out to be true, at the $9 billion price -- Valeant has overpaid by perhaps 30 percent, here.

Moreover, do recall that Warburg Pincus took about $700 million out of B + L in cash, just about two months ago (see the first full paragraph on page 4 of the Form S-1 amendment) -- using additional bank debt to do so. Will Valeant assume that bank debt? I'd argue that it shouldn't -- that $700 million ought to be repaid by Warburg, prior to closing any rumored deal, and were I advising Valeant, I'd insist on it.

Said another way, if Valeant allows Fred and Warburg to push that $700 million of debt onto Valeant's books, Mr. Hassan will have acheived $9.7 billion of his wanted $10 billion asking price. Recall that Abbott, Cardinal, Merck, Hospira, Pfizer and many other major strategic players, declined to even make firm offers anywhere near Mr. Hassan's $10 billion asking price -- just five months ago, now. That, too, should tell Valeant that it is about to over pay, here. [Updated, and an aside: see below the pull-quote -- for how this little cha-cha may have cost the B + L shareholders a chunk of their return, in other ways, as well. Time is money, afterall.]

In any event, here's more from the WSJ:

. . . .[I]n 2010 Warburg recruited Fred Hassan, a longtime pharmaceutical executive with a history of leading turnarounds and arranging megadeals, to join the firm as a partner and become chairman of Bausch & Lomb. Before joining Warburg, Mr. Hassan led drug maker Schering-Plough and merged it with Merck. Earlier he helped combine Pharmacia & Upjohn Inc. with Monsanto and then sold the resulting company to Pfizer.

It is unclear exactly how much Warburg and its minority partner on the deal, buyout shop Welsh, Carson, Anderson & Stowe, would make on a sale—for reasons that include uncertainty around how much assumed debt would be included. Nonetheless, the return on a $9 billion sale would be multiples of the $1.3 billion or so the firms put into the deal, securities filings show.

The return was plumped by a $772 million dividend Bausch & Lomb paid its owners in March, according to a securities filing associated with the planned IPO. Bausch borrowed $800 million to fund the payout. Warburg owns about 87% of the company, the filing shows, with Bausch executives and Welsh Carson owning the remainder. . . .


Obviously, the above is an updated version of the WSJ's original rumor piece, of Friday afternoon. It goes into much detail, about Warburg Pincus, and Mr. Fast Fred Hassan. If Fred, or his people (at Warburg, or Bausch + Lomb -- including the ex-Merck press guy), are making themselves available for the above sort of background color, on Fred's career, they are effectively closing the IPO window -- at the SEC -- for at least six more months.

Applicable SEC rules impose a "cooling-off" period, once it has been shown that the issuer (Bausch + Lomb) or/and its affiliates (here both Warburg, Fred and the other bankers) have been "priming the pump" -- for the IPO, without filing amendments to the SEC registration statement.

And so, all this deal chatter is jolly good fun, but if it falls through, Mr. Hassan and his crew have likely put B + L in a pinch.

B + L is likely to be locked out of the IPO market by the SEC for about six months from the date that the last bit of this rumor is repeated (if it turns out to be among the sources for the rumor). Nicely-done, Fred! Once again, you've narrowed the stockholders' realistic options for a return of their capital, to inflate your own personal net worth, and feed your ego-driven vanities (all assuming, of course, that you've been allowing these rumors to circulate freely).

Friday, May 24, 2013

Rumor Mill Grist: Quiet Pre-Holiday Friday "Fast Fred" Chronicles Edition


Normally, I'd leave this alone. It only tangentally connects to New Merck, in any sense. However, it's a quiet Friday here in the office, so. . . I'll comment on this WSJ-sourced rumor piece.

While it is true that Valeant, a Canadian outfit, has shown a true proclivity for bidding into deal spaces, recently -- it has closed very few of those it has set out to hunt down -- and none, in this size range, as far as I can tell.

At (a rumored) more than three times B + L's TTM sales revenue, this would be very rich pricing, indeed. Recall that no one would firmly offer to pay Mr. Hassan's wanted $10 billion price, at the end of last year. Recall also that B + L has spent quite a bit to get ready for an IPO, this Spring.

Knowing Fast Fred as I do, it wouldn't shock me if this is simply a "stalking horse" rumor, to get the IPO fires stoked -- and get potential retail investors in such a planned IPO thinking that the newly public company called B + L (soon to be renamed from the awful WP Prism, Inc.) could at some future point be "flipped" -- at near these valuations. Get 'em hearing the sizzle -- then deliver no steak. . . That's Fred's usual way.

In any event, for what it's worth -- here is a bit of the WSJ piece -- do go read it all:
. . . .Bausch & Lomb, which is owned by private-equity firm Warburg Pincus LLC, could strike a deal to be sold to Valeant next week, the people said. The deal isn't done yet and could still fall apart, one of the people cautioned.

Should that happen [Valeant deal falls apart], Warburg and Bausch & Lomb could proceed with an initial public offering of stock in the eye-care company that had been planned. . . .
Me? I'll be surprised if it does turn out to be true -- certainly, at that $9 billion price. Note that I added the bracketed matter to the quote, to clarify what the writer meant. If the deal falls apart, Fred has now already been able to generate some great (pre-IPO) "quiet period" pump-priming rumors. Normally, rumors a-swirling are no big deal -- but if he uses them to help him flog the stock, prior to SEC granting the IPO an effectiveness order, he's likely to be in some hot water. [I wonder if the SEC will open a jacket on this one, as well -- if such a leak were traced back to B + L, or its bankers, or Warburg Pincus -- that would be a plain violation of about a dozen SEC rules.]

Yep -- this looks to me like some cha-cha to help sell the initial public offering of B + L stock, in the next couple of weeks. To be clear, I expect that Valeant is actually in talks, and actually believes it might "win" the deal. I just think Valeant may be serving as Fred's cannon-fodder -- for the B + L IPO. But what do I know?

Nation's Most Populous State Unwraps Its Health Care Exchange -- And At Least 13 Private Insurers Join The Effort


California has unveiled its private public state-run exchange. And it is a model of cooperation. Even the rhetoric in the health insurance companies' on-air ads reflects this: last fall, health insurers were referring to the effort's prospects "an uncertain time" -- as they pitched their products -- to individuals and businesses.

Yesterday, in the land of Big Sur, I heard several on-air FM radio ads that touted the "great opportunities" in "health care reform" for all of the state's insureds. Yes, a private, for profit insurer was calling "reform" by its name -- and lauding it, as "positive reform". That is how far we've come.

[BTW, Congressional Republicans planning on running at the mid-term against this wave, will do so at their considerable peril.]

Of course, there will be glitches, and of course it will need some fine tuning and mid-course correction(s) -- but we are seeing a new delivery model, in action, in California -- with millions more patients eligible for, and receiving at least basic health care, at an affordable price.

Yes, change is always hard -- but that is what most of the complaining will be about, from here on, in California -- people just get uncomfortable around change. But it is the way of all things -- they change. We will keep an eye on all of this for the readership, of course.

From a bit of The New York Times story, then -- do go read it all:

. . . .The new rates for individuals will be about the same — or lower — than the current rates for small businesses, according to officials from Covered California, the group operating the exchange.

“The changes in the market are really making individuals much more like employer groups,” Paul Markovich, the chief executive of Blue Shield, said. Like people who now receive health insurance through their employers, individuals buying policies on their own will be able to enroll next year even if they have a potentially expensive medical condition, and the policies’ benefits and premiums will be more standardized.

“We held insurers’ feet to the fire,” said Peter V. Lee, the executive director of Covered California, who said that the exchange had received interest from 33 insurers and actively negotiated with them over their proposed rates and the kind of network of doctors and hospitals they would offer. Covered California estimates that the plans offered will allow consumers access to about 80 percent of the state’s practicing physicians and hospitals.

While Washington, Vermont and several other states have also announced the details of their respective exchanges, California’s size and previous support for the health care law made it an important test of the law, said Paul B. Ginsburg, the president of the Center for Studying Health System Change, a nonpartisan research group in Washington. “A lot of people will be watching California to see how well it succeeds,” he added.

California chose to behave more like Massachusetts in aggressively negotiating with insurers on behalf of its residents. . . .

I think California (and Massachusetts) have that just right -- these states must negotiate fiercely with the private insurers -- on price. That is their duty, to their citizens. The charge is to provide as much health care as possible, at the best price, to the highest number, and widest swath, of state residents. It will be bumpy at first -- but it bears watching. It is the wave of the future. And it is the right thing to do.

Finally, even though anti-reform worry-warts were predicting close to 30 per cent premium increases for healthy young people in California, the increases are averaging around 13 per cent -- less than half the fear. And, it is highly likely that these healthy young people were being undercharged under the prior rubric. So now you know.

Thursday, May 23, 2013

Legacy Schering-Plough Parkinson's Candidate (SCH 420814) No Better Than Placebo; Phase III Program Terminated.


The chemical name of the candidate was (is) Preladenant (SCH 420814). Kudos to Merck, I guess -- for promptly sticking a fork in it -- and not waffling about other potential redesigns.

[Insert here my usual rant about legacy Schering-Plough CEO Fred Hassan's [non-] pipeline dreams. I'm even boring myself, with this stuff -- so repetitive, right?] I'd guess that between them, Schering-Plough and Merck spent north of $400 million from early-concept, to the latest three Phase III studies, on this.

From the presser:
. . . .The Phase III clinical program for preladenant included three randomized, controlled clinical trials to evaluate safety and efficacy. Two of these studies assessed preladenant when added to levodopa therapy in patients with moderate-to-severe PD, and one assessed preladenant as monotherapy in early PD. More information about the preladenant Phase III clinical trials is available on www.clinicaltrials.gov. . . .


And. . . yet another one bites the dust. Thanks, Fred! [We can't spell "Failure" without. . . U!]

A "White Whale" -- Now Disappearing -- Over The Still-Luminous Horizon?


More than a few usually-reserved journalists have referred -- over the last few days -- to suvorexant's potential to be an insomnia agent with a "clean" morning wake-up (no impairment, or grogginess) as the "great white whale" many a pharma-captain has long roamed the oceans, hunting, just as we all remember, Ahab did.

Me? i'm not so sure. . . .

Based on the newly-public, more detailed looks at the study data Merck submitted to support FDA approval of suvorexant, several FDA staffers are now apparently concerned that -- as is true of all agents now on the market (including many cheap generics) -- a 40 mg dose of suvorexant will be associated with some non-trivial morning after impairment.

And so -- when you read of stock analysts boldly predicting north of $500 million in peak annual sales for this drug -- they are doing so on the assumption that it is the legendary white whale: a drug that lets you sleep, but doesn't leave you foggy, in the morning.

After hearing Merck's own science staff suggest that suvorexant is likely "not very effective" at improving sleep, at the 10 mg dose which these FDA staffers felt would be "safest" (for driving, on the morning after), I simply cannot shake the notion that this agent -- while first in its brand new class -- is going to be much more of a "me too" product. A me too -- fighting it out with the generics -- at perhaps ten times the cost.

So, now it is up to FDA: does Merck get approval for a sleep maintenence indication, at the higher doses (30/40 mg)?

And, if so, will FDA slap lots of tough label restrictions, onto to the bottle/into the insert? That is, will the label read like all the others now on market: "don't drive the morning after taking," etc.? [If so, why not take the cheaper generic?]

If, on the other hand, FDA grants approval on the 10 mg dose only, and thus sends a signal that "safety" here is far more important than being sure to sleep through the night (go low and slow, at first) -- will doctors write off-label, in double (or higher) doses? And even if they don't -- what to make of patients who decide to double dose, on their own, when they cannot sleep?

All of these vagaries lead me to the strong hunch that suvorexant's approval -- which will happen in 2013 -- will only be moderately good news for Whitehouse Station. I remain convinced that it will peak at under $200 million in annual sales -- in 2017 or so, based on the signals buried in the study data, seen yesterday.

And so, Ahab's "great white whale" has likely crested the horizon, showing its tail to us, yet again. At least that's my guess. What's yours?

Wednesday, May 22, 2013

Merck Should Be Preparing Contingency Plans -- For Other Means Of Generating "No- or Low-Tax" Transfer Pricing/Licensing, On Its Intellectual Property


An Irish minister just "played the soft part, loudly" -- on multinational corporate tax gamesmanship (see quote, below -- uttered midday time in Dublin -- very early in our morning hours, on the east coast). It is clear that this is going to become a larger problem for Merck, GE, Pfizer, Lilly, HP and Intel -- just to name a few. Yep -- today, the ministry-level official tasked with encouraging multi-nationals to locate on the Emerald Isle called for an end to the aggressive gaming of the "stateless" corporate structure, for taxation purposes.

[By the way, a few days ago, I said I'd (at some point) get into how Merck's use of intellectual property transfers (primarily off-shore licensing of the patents, and know how, related to its drug compounds and molecules, but increasingly, on the brand names' registered trademarks, as well) differed from Apple's. Consider this to be that post.]

As a result of some sharp questioning before Congress, we all learned yesterday that Apple does essentially the same thing Merck does. And to be fair, Pfizer, and Abbott and Baxter and Lilly and HP and Intel all do it, too. That is, Apple has caused ownership of its patents and know how, on its tech products, to reside in companies set up in Ireland. So, we may quibble about whether Tim Cook is engaging in sophistry when he declares Apple uses no "tax gimmicks", but it is now certain that Mr. Cook's company uses almost every one of the same structures (gimmicky or not so) the multinational pharmaceutical companies use, to minimize their tax payments in high rate jurisdictions like the United States, and shift profits to low rate jurisdictions like Ireland, and parts of the Carribean.

I'd look for PhRMA to shortly come out, from behind the Oz-curtain, and make a pronouncement supporting reform -- corporate tax reform -- that would reduce the incentive for this sort of maneuvering. It seems that Apple has been a stalking horse for pharma, right along. Because Apple's gagets are so widely-adored, it was thought by PhRMA, Apple would have a better chance of getting through Congress or the White House, on a lowered tax rate mantra. Mean old evil pharma was long-known to have no such possibility -- not even remotely so.

Afterall, pharma would certainly like to have easier access to all its retained cash earnings, worldwide, at some overall lowered tax rate. And that will be exactly what the conjectured, but likely coming PhRMA white paper will ultimately angle toward -- though quite completely silently -- like a shark, in the deep, azure, open oceans. Watch for it in 3... 2... 1...

We will keep you posted -- but as several of these companies execute the (i) parent-only obligor debt issuance, followed by the (ii) super-sized stock buyback and (iii) debt repayment strategies across the globe, they will have a reduced near term need for an outright tax holiday, on repatriating overseas earning,s to the US. Why? Because they are acheiving much the same thing, in these three step transactions -- without having to get Congress or the President involved.

From AppleInsider, then:

. . . .The minister in charge of attracting foreign companies to Ireland is now saying that those companies need to be brought under control, according to Reuters.

"They play the tax codes one against the other," Richard Bruton told Irish state broadcaster RTE, "and I think we do need international cooperation through the [Organization for Economic Cooperation and Development] to deal with the aggressive nature of that."

Ireland has long drawn criticism from other European nations for its low corporate tax rate of 12.5 percent. That tax rate encourages companies to locate at least some operations in Ireland for tax purposes, which is what Apple does, along with Google and Yahoo, Pfizer, and Intel, as well as many others. Of Ireland's two million-strong labor force, about 150,000 work for foreign companies headquartered there for tax purposes. . . .
It seems that the antiseptic effect of. . . sunshine. . . is starting to take hold -- even in my cousins' government, on the Emerald Isle. Having said all of that, I do support a simplification of the US tax code applicable to multinational corporations. We could easily take away the vast incentives to engage in this sort of gamesmanship, and have a no-deductions, straight-ahead tax on corporations' profits (Tim Cook even said so!). But, more on that -- some other day.

UPDATE: 16 YES VOTES -- We're Monitoring FDA Advisory Committee Meeting On Suvorexant: Unfolding As Expected


05.23.13 @ 4:42 PM EDT | UPDATE | I've put together some "day after" analysis, under that link, there.

As expected, most of the healthy skepticism centers around dosing levels -- not overall safety, or efficacy. You can follow along here, by logging in as a "guest" -- no password or email needed.

4:35 PM EDT | UPDATE | VOTE 8 against suvorexant's automatic up-dosing, at 30/40 mg dosing, if no improvement seen at lower doses (15 mg) -- 7 vote for higher doses -- 2 abstaining. So Merck may have labeling warnings, as to the higher doses.

4:14 PM EDT | UPDATE | VOTE 13 in favor of suvorexant's safety at 15 mg dosing -- 3 vote against -- 1 abstaining. So Merck may well get it across the finish line unchanged, on dosing -- labeling looks to be where this is sorted out.

3:36 PM EDT | UPDATE | VOTE 11 vote against new 10 mg efficacy studies -- 5 in favor of new studies -- 1 abstaining. So Merck need not do additional studies -- the dose discussion continues -- labeling may be where this is sorted out.

2:53 PM EDT | UPDATE | VOTE 16 in favor of approval -- 0 against -- 1 abstain -- on the question of "sleep maintenance". So Suvorexant is approvable -- now the dose discussion begins.

2:50 PM EDT | UPDATE | VOTE 12 in favor of approval -- 4 against -- 1 abstain -- on the question of "sleep onset". So Suvorexant WILL reach the US market, in a about a month.

2:40 PM EDT | UPDATE | There is a move toward separating the approvability vote into a "sleep onset" and "sleep maitenence" votes -- essentially suggesting two separate indications will be voted upon, at 4:30.

In either case, it does seem that there is a visible majority of committee members who are leaning toward recommending approvalbility (on one or both indications) -- but likely with some suggestions about lower dosing, to start.

I will post the outcome of the vote, around 4:30 PM EDT. And although the full FDA Commission is not required to follow the Advisory Committee's views, they usually do. I do continue to see a 2013 approval date in the US for Suvorexant.

I also see only modest sales uptake, given the number of generic competitors in the sleep aid space.

Tuesday, May 21, 2013

Debt Deal Closed Last Night; Merck Up 4.7% On Triple Volume Today. Why? Goldman Sachs, That's Why.


We interrupt my dry, wonkish patter (on tax advantaged foreign earnings repatriation strategies), to note for the record that less than 24 hours after Merck closed on the $6.5 billion debt deals, it hired Goldman Sachs (a lead underwriter of the same just-closed debt deals) to conduct an accelerated stock repurchase, or buyback -- of up to $5 billion, or about 99 million Merck shares, at yesterday's NYSE closing price.

I have to wonder, though, whether the SEC market surveillance folk don't already have a file open -- given that Merck fell almost 2 per cent yesterday, on average volume -- only to rise 4.7 per cent today, on triple volume, to boot.

It sure feels like someone knew about the accelerated timing, and massive sizing, on this Goldman contract for the ASR. [I suppose it could be that the market finally agrees with me, that Suvorexant will be given a green light tomorrow afternoon at the FDA Advisory Committee meeing -- but that is not even a one quarter of one percent uptick event, in my estimation -- and Merck was up close to five per cent at various points today.] So -- does someone at Goldman have loose lips? We will soon know.

Well, if I was a Goldman Sachs bond buyer last night, who also happens to hold Merck common stock -- I might promptly ask to get best price sales treatment on my Merck shares, given that Merck is buying them with my money -- money I just lent Merck, yesterday.

From Merck's just-issued press release, then:
. . . .Under the terms of the ASR, Merck has agreed to repurchase $5 billion of its common stock from Goldman, Sachs & Co., in total, with an initial delivery of approximately 99.5 million shares based on current market prices. The final number of shares to be repurchased will be based on Merck’s volume-weighted average stock price during the term of the transaction, which is expected to be completed no later than November 25, 2013. . . .
This is exactly why that FINRA Rule 5121 discussion matters. It is very easy for the little guys to get crushed here -- but Merck will rise, as I said, through the end of 2013 -- in general, broad strokes -- and this sort of stuff is no small reason why.

Monday, May 20, 2013

Since I've Been Comparing Merck To Apple -- On Repatriation -- Here Is (Apple CEO) Tim Cook's Testimony, For Capitol Hill, This Week


UPDATED: 6:05 PM CDT | 05.20.13 -- The New York Times now has released its piece on all of this, online -- and Apple's Time Cook gets excoriated in it -- for some of the hyperbole in his 17 pages, below. In my estimation, it is only a matter of time before the Times catches up to Merck and Pfizer. And possibly Congress will, too. [End, updated portion.]

At some point tomorrow, I'll get around to explaining the ways in which Apple's corporate structure, and use of CFCs, or controlled-foreign-corporations, differs from Merck's approach. [Hint: It primarily involves the transfers of intellectual property, to generate more income in tax haven jurisdictions -- in Merck's case.] But for now, you may safely assume that -- in the main -- they are largely similar. At least similar enough to make it worthwhile to watch what Apple does -- on foreign cash repatriation, as a "canary in the coal-mine" -- for what Merck might do.

And so, here is the advance-copy (that is some 17 pages of PDF goodness!) of Mr. Cook's upcoming testimony before Congress -- on Apple's recent $17 billion debt issuances, its unimaginably large $60 billion stock buyback program. . . . all of which drives his call for reform of the United States corporate tax code (which, he argues, makes most of these complex financial machinations necessary).

Having said all of that, though -- Apple does pay an immense amount of US corporate income tax. Mr. Cook estimates that Apple is responsible for almost $1 of every $40 the US Treasury collects, in corporate income taxes, from all corporate taxpayers -- paying more than $6 billion in federal taxes in 2012 (which, to be fair, of course -- may just mean that companies like Merck and Pfizer aren't paying their fair share). Wow. Apple's effective 30.5 per cent federal income tax rate here in the US is much higher than Merck's (which stood at 27.9 per cent at year end 2012, but was around 11 per cent in 2011) -- and dwarfes Merck's 2012 $2.44 billion in tax payments, on a dollar for dollar basis.

. . . .Apple, a California company, employs tens of thousands of Americans, creates revolutionary products that improve the lives of tens of millions of Americans, and pays billions of dollars annually to the US Treasury in corporate income and payroll taxes. Apple’s shareholders – from individuals and institutions to pension funds and public employee retirement systems – have benefitted from the Company’s success through the appreciation of its stock price and generous dividends. Apple safeguards the capital entrusted to it by its shareholders with prudent management that reflects the Company’s extensive international operations. Apple complies fully with both the laws and spirit of the laws. And Apple pays all its required taxes, both in this country and abroad. . . .

More tomorrow. And by the way, Merck CFO Kellogg did talk about why he did the aggregate of $6.5 billion debt deals last week, and why the $16.5 billion stock buy-back is happening now, at Merck -- but didn't even remotely hint at repatriation, in his UBS talk today, in Manhattan. And he didn't mention the underwriters' conflict of interest -- even though Merck did a much more complete job of disclosing it, under FINRA Rule 5121, than Apple did -- in its similar definitive 424(b) debt prospectus, of early May.

Suvorexant Update: Still On Track For 2013 FDA Approval, Sales Uncertain In Crowded, Genericized Sleep Space


The good news here is that nothing untoward has turned up in this morning's FDA reviewer/staff packet, in advance of Wednesday's FDA Advisory Committee meeting.

The candidate is still on track. However, the pitch has always been that suvorexant's appeal would lie in its "next morning clarity" -- that is, it would not be associated with impairment in the morning after being taken -- as so many previously FDA approved sleep aids are, on market.

The FDA reviewers are now noting some morning after impairment -- and talking about lower initial dosings -- all in a space full of generic competitors. That makes the sales outlook a little cloudy. A bit from Reuters, then -- do go read it all:
. . . .Merck's experimental insomnia drug suvorexant appears generally effective, according to reviewers at the U.S. Food and Drug Administration, but they questioned the company's proposed dosing levels.

The reviewers posted their comments on the FDA's website on Monday, two days ahead of a meeting of outside medical experts which will advise the agency on whether or not it should approve the drug. . . .
We will of course keep you posted on Wednesday afternoon, but I expect a solid majority vote, in favor of US FDA approvability.

In Ten Days, Linda Secrest Will Likely Know Whether The Supreme Court Will Grant Her A New Fosamax® ONJ Trial


As I mentioned here on May 5, I don't hold much hope for Mrs. Secrest. Here's a link to the Supremes' docket sheet, on the Secrests' petition.

I think the Supremes will leave the decision of the Second Circuit undisturbed. I expect they will deny cert. without an opinion. I'd expect it to be part of a long list of no cert. dispositions, by the Court.

In fact, Merck seems pretty confident: Whitehouse Station has waived its right to brief the court on the reasons why it might feel the Second Circuit's decision -- upholding the able trial Judge Keenan's summary judgment for Merck -- was correct. Here's a bit from Law 360, as to what the appeal is all about -- do go read it all:

. . . .The physician at issue, Dr. Lawrence Epstein, testified in a deposition in 2008, before Merck filed a summary judgment motion, that he had not known Secrest was taking Fosamax in 2004 and 2005, after she had started seeing another doctor.

When he was deposed again in 2011, after the motion was filed, he said he had known about Secrest's Fosamax use during those two years, and that he would have advised Secrest to stop taking the drug if Merck had warned him of the jaw-related risks.

"If the Second Circuit had applied the more expansive standard of the Seventh Circuit, it would have determined that Dr. Epstein's second deposition was merely a conflicting deposition, not a sham," Secrest's petition states. . . .


We will let you know how the May 30 Supreme Court Conference session on this one turns out -- but I'd be very surprised if they grant Mrs. Secrest a hearing, or any sort of remand for new determinations on this trial record.

All of that said, though -- I do think the Seventh Circuit's formulation of the test more reliably comports with our long-standing notion that issues of fact (and credibility) should be left in the hands of a jury to decide. I suppose it is possible here, that Judge Keenan (who sat through the whole trial with the jurors) found Dr. Epstein's statements so lacking in credibility that he decided no reasonable juror could rely on either version of the doctor's testimony, and thus took the matter out of the jury's hands, altogether.