Wednesday, October 30, 2013

Further Zilmax® Chronicles: Cargill Tells Whitehouse Station: "Erh, Not Quite So Fast, There Pard'. . ."


Yesterday, we mentioned that Merck had readied a plan to expedite the end of its own voluntary withdrawal of Zilmax® from the late stage cattle feed/fattening markets, in Canada and the United States. As a voluntary withdrawal, Merck needs no regulator approval (FDA or USDA) to reintroduce the feed/drug supplement. However, it will need. . . some customers. Buyers, that is, of the cattle so fed.

And tonight, one of the world's largest purchasers of beef-yielding cattle is. . . pretty plainly balking. Cargill Inc., today said it will buy no cattle that will be un-acceptable to Japanese markets (or, said another way) until it is "100 per cent certain" that Zilmax is safe, in the way it is being used. That likely means Merck needs a longitudinal study of some sort. And that could take a few. . . years.

Ouch. Of course, Whitehouse Station might push forward -- trying to convince other packers to ignore Cargill's newly-articulated stance.

But the rub will be at the ranchers' level -- many of them, perhaps most of them -- cannot afford to have Cargill close its doors on their product. The ranchers need every available market. That means, in all likelihood, the ranchers won't buy much of Merck's Zilmax, near-term, even if Merck re-introduces it very shortly. At least, they won't buy much until Cargill says it will buy the cattle fed Zilmax, once again. So this is a bit of a jam, at present, for the long-suffering Animal Health folks, originally from Organon, then bought by legacy Schering-Plough, only to be sold again, to Merck. Hard luck, that.

Here is the Global Post story on it -- and a bit. Do go read it all:

. . . .Cargill Inc, one of the world's largest beef processors, threw a wrench into Merck & Co.'s plans to reintroduce its feed additive Zilmax, stating it will not accept Zilmax-fed beef into the Cargill supply chain "until we are 100 percent confident the animal welfare issues are resolved."

Cargill told Reuters Wednesday its ban on Zilmax applies both to beef it processes, as well as to cattle in its own feed lots. In addition, Cargill said it will not use Zilmax-fed beef "until Asia and other trading partners accept it in their markets. . . ."


Well now, this is shaping up to be a real big league show-down -- two mega-billion dollar multi-national public companies, going toe-to-toe. Do stay tuned, right here -- we will (as always) keep you informed. [And, congrats to my Boston back-bay cousins/bros. . . first at-home Series win -- since 1918! Nice.]

Tuesday, October 29, 2013

Will Zilmax® Return To US and Canada, Pretty Shortly? Reuters Has Been Told So. . .


We learned on Monday morning that the withdrawal of Zilmax® in the US and Canada was a significant factor in the flat Merck Animal Health sales revenue results, compared to Q3 2012.

Tonight, Reuters has an exclusive story, straight from Whitehouse Station, setting a pretty short path to the return of Zilmax. Here's more of my reporting the back story (on why it was initially pulled) -- and a bit from Reuters' story, tonight -- do go read it all:

. . . .The email from company spokeswoman Pamela Eisele said Merck was "committed to completing this as quickly as possible, while also ensuring it is conducted appropriately and with rigorous scientific measures."

In a separate statement, Merck said it has formed an advisory board that includes representatives from meat processors, cattle feeder operations, producers, veterinarians, academics and industry consultants. . . .


We will keep you posted.

Turns Out Whitehouse Station Is Also Running Small Early Trial (Phase Ib) On Lambrolizumab, In Certain Lung Cancers


You will likely recall that Lambrolizumab is also called MK-3475. It has received breakthrough designation at FDA, for melanoma -- or skin cancer. It is provisionally named after the "Lambo-lizards" who get skin cancer on their balding pates, while tooling around, in the southern California sun, top down. That's a pretty lucrative potential market, for Merck.

It is new to me, anyway, that MRL is also running an early, small (primarily) safety study, in certain previously-treated non-small cell lung cancer patients. That study is showing some decent results, at first blush. So that is some minor good news for Whitehouse Station, post a rather rough day yesterday, on earnings. The NYSE traders tackled Merck for an over 2.4 per cent price sack, yesterday over the thinning pipeline, slowing Januvia growth and generally ho-hum quarter. That top line sales were light -- even against reduced Wall Street expectations -- is of concern, longer term.

So, today, Merck is touting some happy news. But this won't ever move the needle, to be sure. It is just not material, to a multinational $47 billion a year in sales pharma company. Here's a report from Drug Discovery & Development, just the same. Do go read it all:
. . . .The data were presented by Dr. Edward Garon, director of Thoracic Oncology, Jonsson Comprehensive Cancer Center, University of California, Los Angeles, at the 15th World Conference on Lung Cancer in Sydney, Australia.

Detailed interim data were presented for response rates and safety from a cohort of 38 previously-treated NSCLC patients who received MK-3475 10mg/kg every three weeks as well as initial findings from an analysis of the relationship between response rates and PD-L1 expression.

“We are encouraged by these initial responses in NSCLC patients,” said Dr. Eric Rubin, vice president, Oncology, Merck Research Laboratories. . . .


We will keep you posted, but 38 people is truly. . . waifish. My advice? Just don't read too much into this. But it is encouraging, just the same. Of course, oncologists may always write off label, for non-small lung cancer, once it is approved by FDA for melanoma. . . the reimbursement might get tricky -- but it can be done. So. . . stay tuned.

Monday, October 28, 2013

Merck: Sales Lighter Still; Non-GAAP EPS "Beat" Driven Primarily By Finite Expense Savings


Globally, Januvia revenue has actually declined by 1 per cent (vs. Q3 2012); and that includes 3 per cent of currency headwind, so the non-adjusted growth in Januvia® would have been positive 2 per cent, ex-currencies. Company wide, currencies took an additional 2 per cent from the sales line [I had guessed 3 per cent, but Whitehouse Station has apparently added to its currencies hedging positions, since last quarter, booking only $11 million of currency exchange losses, for Q3 2013, compared to $50 million in Q3 2012]. R&D spending is down by about $200 million, at $1.7 billion in Q3 2013 (compared to $1.9 billion in Q3 2012).

That's the pull-through of Dr. Perlmutter's refocusing efforts. However, Merck charged off north of $870 million in Q3 2013 alone, to get there. These sorts of restructuring savings won't be available forever, to boost bottom line non-GAAP EPS. And this quarter, they cost 8,500 people their careers, and livelihoods.

Before currencies, sales in Animal Health were flat -- but currencies caused an actual decrease of 2 per cent compared to Q3 2012 (The voluntary withdrawal of Zilmax® in the US and Canada was a contributing factor here). The brightest spot on the income statement released this morning was Remicade®/Simponi® -- which was up 16 per cent, and up 22 per cent given favorable currency exchange rate-trends -- in the countries where Merck holds the right to sell it. Per Reuters:

. . . .[Merck said] sales of its Januvia diabetes treatment fell, raising more concerns about growth prospects for the company's biggest product. . . .

The company said on Monday it earned $1.12 billion, or 38 cents per share, in the third quarter. That compared with $1.73 billion, or 56 cents per share, in the year-earlier period. . . .


For the full year, Merck now expects a 5 to 6 per cent decline in global sales (and about half of that decline being currencies related); with non-GAAP EPS coming in at year end between $3.48 and $3.52 per share. Shares are off around $0.80 here, on the NASDAQ's pre-market screen. So it goes. Graphics soon.

Friday, October 25, 2013

Whitehouse Station To Report Third Quarter 2013 Earnings, Early Monday Morning


I'd look for a continuing erosion in the rate of revenue growth in the Januvia®/Janumet® franchise -- at around $4 billion a year, now the world's third largest drugmaker's best-selling franchise. I'd look for currencies to take back at least three per cent of Merck's non-US sales growth (assuming the company hasn't entered into new, and very large, hedges here in the third quarter of 2013). I'd expect slightly softer than expected global sales revenue, but in-line EPS, due to expense control, and the recent 8,500 position elimination announcement. And, speaking of that, I'd expect a large (well north of $500 million) one time charge, in Q3 2013 -- a number Merck will exclude from its non-GAAP EPS reporting on Monday.

Beyond that, I'd expect to hear about Merck's updated expected timing -- on its latest two candidates to receive "breakthough" status at FDA -- including whether the company expects any delays due to the now ended shutdown.

We will live blog anything that is a material surprise -- here's a bit from a press account, overnight:
. . . .Merck. . . is set to post its Q313 quarterly earnings results on Monday, October 28th. Analysts expect Merck & Co to post earnings of $0.88 per share and revenue of $11.19 billion for the quarter. Merck & Co has set its fiscal year 2013 guidance at $3.45 to $3.55 of earnings per share. . . .


Check back Monday morning -- and have a great pre-Halloween weekend!

Thursday, October 24, 2013

Mylan Held To Infringe Merck/BMS Sustiva® Patent -- Nixing Mylan's Polymorph "Generic" Efavirenz


In a memorandum opinion issued in the federal District Court for the Delaware District, back in late August, BMS/Merck won an important patent infringement case -- protecting its proprietary efavirenz HIV therapy (branded as Sustiva®, and sold jointly).

Unfortunately, until Monday of this week, that opinion had been sealed. Now, a redacted version of that opinion has been made public in Delaware (a 37 page PDF file). The trade secrets about Mylan's version (and its manufacture), are now blacked out.

The opinion delivers a complete and resounding win for the branded manufacturers. And so, this most recent Aurobino patent infringement action -- on a similar claim of infringement of the so-called '372 patent -- is likely to result in another win for BMS/Merck.

. . . .[Merck/BMS] has proved by a preponderance of the evidence that Mylan's ANDA product infringes asserted claim 18 ofthe '372 patent. Mylan has failed to prove by clear and convincing evidence that claim 18 of the '372 patent is invalid. By separate order, the parties will be directed to submit an appropriate form of judgment consistent with this opinion. . . .


I wouldn't expect to see a US generic or biosimilar version of Sustiva on market for the foreseeable future -- and I think the '372 patent runs to June 2019 or so -- even without any "evergreening," if memory serves.

I suspect Teva's similar action will also result in a win for Merck/BMS. So it goes -- we will keep you posted.

Wednesday, October 23, 2013

With Shutdown Induced Backlogs, FDA Breakthrough Status May Mean Only Small Timetable Change


Ed Silverman's recently sourced, highly credible material made a pretty compelling case for the notion that -- due to the engineered government shutdown, by Congressmen Cruz, Lee and Rubio (and the other radical Tea Partiers, unopposed by Speaker Boehner) -- the FDA will need two days of recovery time, for each of the 15+ shutdown days, to return to normal. So, about 40 days from now, FDA will be back to normal. Sheesh.

I applaud Merck's "twin wins," here -- but I also imagine that this development just puts these candidates on about the "pre-shutdown" timeframe for "normal" review, from this point, forward. Thanks again, Tea Partiers! FierceBiotech here, reporting:

. . . . Merck's beleaguered R&D group picked up another breakthrough therapy designation from the FDA. On the heels of a BTD for MK-3475, the pharma giant's closely watched cancer immunotherapy, Merck now has boasting rights for a combo therapy for hepatitis C, MK-5172 and MK-8742. . . .


So it goes. But. . . Kudos, just the same! [One of these, MK-3475, is the science nerds' naming playfulness -- lambrolizumab. Hah!]

Tuesday, October 22, 2013

The Only Thing Known About Merck's Anacetrapib Candidate. . . Is That It's Too Early To Know. . . Much Of Anything


Almost exactly three years ago, now, I said the outlook for this drug candidate seemed unclear.

That is still true.

Of course, one never really wants to see that a drug lingers in the patient's body, beyond two years after (and in a small number of cases, four years after) the patient stops taking it. That said, the real question was, is -- and remains -- will it cut heart attack risks significantly?

And that question remains entirely unanswered tonight -- and will remain so, for perhaps another 1,000 to 1,200 more nights. So we wait. But here is a bit of Matt Herper's story, tonight. Do go read it all:

. . . .The problem is this: after you take it, anacetrapib appears to stick around for years, according to new results made available online on October 4 by the American Journal of Cardiology. In the new analysis of one of Merck’s studies of the drug, anacetrapib blood levels three months after patients stopped taking the drug were 40% of what they were when they took the pill daily. And for 30 patients who were followed for longer, the drug was still detectable in the blood as much as four years later. . . .


Here's to hoping this turns out well, for the science teams at Whitehouse Station. Additional background -- on the value of the program, in terms of Merck's stock price -- here.

Merck Will No Longer Make India A Focus -- Of Developing Markets Strategy -- IP Policies In Play?


Earlier this month, Merck indicated that, as it sharpened its focus, and laid off another 8,500 people, it would no longer count India among its top priorities -- in its developing markets strategy.

Given that Whitehouse Station had been lobbying in DC as recently as August 2013, on India's IP policies, and has (thus far) unsuccessfully litigated the issue of a generic sitagliptin (branded by Merck as Januvia®) derivative (a sitagliptin phosphate form) being sold in India, I suspect these events are part of a cause effect chain.

Feel free to decide for yourself -- and even decide otherwise. Here's a bit from the October 9, 2013 news item:
. . . .US pharma major Merck Sharp & Dohme or MSD has dropped India from its list of priority markets in its latest global initiative to sharpen commercial and R&D capabilities. Other emerging markets like China, Russia and Brazil have found a place on the company's top ten priority market list. . . .


So it goes. I think this is more than a coincidence, though. I think it sensible for Merck to move India back a step or two, if it cannot be sure Merck's IP will be protected there.

Merck Spends $10.235 Million -- On Lobbying, This Year, Through Q3 2013


It looks like Merck spent at least $1.645 million in Q3 2013 alone, on lobbying.

Were I a betting man, then, I'd bet that Merck will eclipse its previous annual high water mark of $10.6 million, this year.

We shall see -- but here's what they spent it on (in the most significant buckets):
. . . ..▲ Patent settlements (no specific bill).

▲ Non-interference in Medicare Part D (no specific bill); Medicaid-style rebates in Medicare Part D (no specific bill); Independent Payment Advisory Board (S. 351, H.R. 351).

▲ Alzheimer's education (no specific bill); 340b (no specific bill); hepatitis C education (no specific bill).

▲ Comprehensive tax reform (no specific bill); transfer pricing of intangibles (no specific bill); territorial tax system (no specific bill); deferral of taxation of foreign earned income (no specific bill); tax base erosion (no specific bill).

▲ Trans-Pacific Partnership (no specific bill); biologic data exclusivity (no specific bill); US-EU trade agreement (no specific bill); trade promotion authority (no specific bill); treatment of intellectual property in India (no specific bill); additives in beef cattle (no specific bill).

▲ Supply chain safety (no specific bills).

▲ Access to over-the-counter medications (no specific bill); compounding (no specific bill).

▲ Deficit reduction (no specific bill); ADAP funding (no specific bill).

▲ Animal Drug User Fee Act (ADUFA). . . .


We will keep you posted -- but I will shortly write a new post -- of the connection between these figures, and Merck's recent India announcement. Fascinating, that.

Monday, October 21, 2013

Merck's Former Chief Marketing Officer Wendy Yarno Joins Animal Health Company Board


A smallish item here, but another Merck alum has landed on a public company board -- this time at a pet med company called Aratana. Here's the [California] Sacramento Bee, on it:


. . . .Jay Lichter, PhD, Aratana's Chairman of the Board, stated, "Ms. Yarno's impressive career at Merck and her deep board experience make her an excellent addition. We expect to benefit greatly from her expertise". . . .

Ms. Yarno held positions of increasing responsibility in multiple business groups during her career at Merck & Co, Inc. Most recently she served as Chief Marketing Officer, where she led the global organization responsible for supporting product commercialization across multiple therapeutic areas. At one point during her career, Ms. Yarno served as Merck's Senior Vice President of Human Resources. Ms. Yarno received an MBA from the Fox School of Business at Temple University and a B.S. in business administration from Portland State University. She also serves on the Board of Directors for St. Jude Medical, Medivation, ADial Pharmaceuticals, and PluroGen Therapeutics. . . .


So it goes. [Ed. Note: Happy Monday one and all -- Banksy will be with us for a few more days, just FYI.]

Saturday, October 19, 2013

Weekend Fare: Site Turned Over To Banksy's Outdoor October Exhibit In Lower Manhattan, And Brooklyn. . .


It was a slow news week at Whitehouse Station. And so, this exhibit has inexplicably captured my imagination, over my coffee, this morning -- may even fly out this afternoon, and spend most of tomorrow rumbling about by cab, to view the parts of it that are still preserved. . .

Seriously, do go read more about it here (via Reuters, but I first saw the article in the NYT morning edition; it is now gone) -- and be sure to visit the online version www.banksyny.com -- if you can't just drive across the bridge and go see it all, yourself. Be excellent to one another.

Wednesday, October 16, 2013

With A New Class Of Lipid-Levels Management Biologics Arriving -- Will Merck's Zetia® Soon Lose Her Voice?


UPDATED | @ 9 PM EDT: A great comment, this is Anon.! ". . . .Small circle & arrow to insert here, Condor. Regeneron, the partner development company here, is home to none other than P. Roy Vagelos. Dr. Vagelos was the last scientific CEO of Merck. Isn't it ironic?

October 16, 2013 at 8:32 PM. . . ."


Ironic indeed, Anon! First, the caveats: it is only a smallish 100-or-so patient study. Second, the much larger outcomes study is still enrolling. Even so, this new class of biologic injectible cholesterol management drug will likely soon eat Zetia's lunch. Putting aside all the controversy surrounding Zetia's [non-]outcomes data, we will soon have a completely different mechanism of action, in the space, on-market. A big old honkin' biologic chain/molecule, to be sure -- but all new.

[For more background on the race to bring AlirocumabTM to market, see mine, from the past Summer.] While Zetia® may turn out to be Merck's No. 2 overall seller this year (as other Merck blockbusters go generic, and fall off), Zetia has been, since 2008, a much-diminished diva, in the Kenilworth to Whitehouse Station (and back to Kenilworth, again!) opera house. Here is a bit of Yahoo! News, on the Sanofi S.A.-Regeneron program successes, with Alirocumab:

. . . .A new type of cholesterol drug being developed by Regeneron Pharmaceuticals Inc and Sanofi SA, when used by itself, cut levels of "bad" LDL cholesterol almost in half in the first of a dozen late-stage trials of the injectable medicine.

The experimental drug, called alirocumab, is from a promising new class of injectable cholesterol fighters also being developed by Amgen Inc and other drugmakers. They work by blocking a naturally occurring protein called PCSK9 and could each garner annual sales of $3 billion or more, if approved, according to some industry analysts. . . .


We will keep you posted -- exciting times -- in the advancement of medicine! [With the government closed, I cannot access the PubChem database's online molecular structure-drawing tool, so no graphical depiction of that monster of a structure, for now. Thanks again, Speaker Boehner -- and Tea Party zealots!]

Tuesday, October 15, 2013

Merck Ireland Clouds Up -- Irish Finance Minister: "The Jig's Up" -- On "Stateless" Tax Free Irish Subsidiary Structures


Well, it's not on the books yet -- but Irish Finance Minister Noonan has reversed course, on the famous "Double Irish, With A Dutch Sandwich" multinational tax cha-cha. As recently as July 2013, he had testified that he thought there was no compelling reason to close the "stateless" tax minimization loopholes available only in Ireland. He said so, in comments related to hearings on Capitol Hill in DC, about Apple, Google and Microsoft tax minimization structures through use of Irish, Dutch and Cayman subsidiaries, via intercompany intellectual property licenses and intercompany debt issuances.

Of course, Merck, Pfizer, Baxter and Abbott -- just to name a few pharmas -- presently rely on these same structures to minimize taxes, and sweep cash around the globe, mobilizing it for various uses, at very favorable tax rates. [More of my earlier background on this, here -- and note my prediction there, in May of 2013, that this fancy "Stateless Double Irish" strategem would come to an end, and soon. Soon is. . . today, BTW.]

So, look for some creative new tax ideas, and a fair bit of new subsidiary creation activity in 2014, at Whitehouse Station, if Minister Noonan makes good on his promise, over on the Emerald Isle. Here is last year's material subsidiary list (note the broad array of Irish and Dutch and Carribean subs!). It will look more than a bit different, come late 2014 -- and Merck may see some tax "leakage" -- at year end 2014 (i.e., it may pay a higher effective average tax rate, overall, around the globe). And that negatively impacts cash flow, one for one. We shall see. Here is a link to a great item -- courtesy of AppleInsider -- and a bit of it (do go read it all!):

. . .Ireland's Finance Minister Michael Noonan said on Tuesday that he plans to push legislation to close a loophole in the country's corporate tax laws that allows [multinational public] companies. . . to avoid paying billions of dollars in taxes. . . .

Noonan's promise to amend Ireland's tax code comes after calls for reform from U.S. Senators John McCain and Carl Levin, who in March said Ireland was a "tax haven" for multinational companies. . . reports Bloomberg.

"I will be bringing forward a change to ensure that Irish registered companies cannot be 'stateless' in terms of their place of tax residency," Noonan said. "Ireland wants to be part of the solution to this global tax challenge, not part of the problem."

The statement marks a change in course from a decision passed by the Irish parliament's finance committee in July, which voted to not question [the multinationals] over their use of the country's tax code. . . .


So -- my NEW (not so bold) prediction is that tax-haven structuring will continue, but we may see quite a bit of frictional changings-of-the-guard, during 2014. When the dust settles, it is likely that some other jurisdiction will be a hands-down winner -- collecting and keeping the jobs created by housing offshore finance companies, for the likes of Merck, Apple and Google. That is, each will have some subsidiary HQs -- in new haven locales. I'll keep the readership posted. [Sadly, there is not yet any House Republicans' solution on the looming US debt default those same Republicans have engineered -- so, no gin & tonic, for me. Ah well. Sad how that works. Off to a workout, instead, then.]

Monday, October 14, 2013

Now, "Doctor" Tim Anderson Cuts Merck Outlook -- At Sanford Bernstein -- To "Market Perform"


I think the last time Dr. Anderson (Ph.D., if memory serves) had Merck at "Market Perform" was back in the Fall of 2008.

As recently as the end of May of this year, he had Merck as an "Outperform".

Here's this morning's news item covering it -- and a bit of it:

. . . .Other equities research analysts have also recently issued reports about the stock. Analysts at Jefferies Group downgraded shares of Merck & Co from a “buy” rating to a “hold” rating in a research note to investors on Friday. They now have a $50.00 price target on the stock, down previously from $53.00. Separately, analysts at Credit Suisse initiated coverage on shares of Merck & Co in a research note to investors on Tuesday, October 8th. They set a “neutral” rating and a $49.00 price target on the stock. Finally, analysts at TheStreet reiterated a “buy” rating on shares of Merck & Co in a research note to investors on Tuesday, October 8th. Two equities research analysts have rated the stock with a sell rating, eight have issued a hold rating and eight have assigned a buy rating to the company. The stock has an average rating of “Hold” and a consensus price target of $51.09. . . .


Of course, we will -- as ever -- keep you apprised.

Sunday, October 13, 2013

"The Courthouse News" Makes A Smallish Miscalculation -- In ENHANCE Federal Securities Class Action Settlement Story


The Courthouse News (online only) accurately reports that the single lead plaintiffs' law-firm recieved an over $4 million "seperate" award, for its fees and expenses. That is true -- but greatly understates the overall take for all the law firms involved.

In fact, all the firms, collectively, were alloted 16.92 per cent of the total pot, after expenses -- for fees. That figure is about $116 million, not about $4 million. Since the error reflects only the lawyers' share of the $688 million, overall, I suppose it is a rather trivial mistake, compared to the overall story -- but here is the orginal link, and a snippet:

. . . . Although more than a million potential class members were notified of the settlement, only two oppositions have been filed, the unpublished ruling states.

"Here, the litigation is at a very advanced stage, as the settlements were reached only a few weeks before trial was to begin," Cavanaugh wrote. "Discovery has been going on for years and has consisted of a vast number of depositions, the review of millions of documents, mock trials, and extensive pre-trial-preparation. The parties have clearly had the opportunity to gain a detailed understanding of the case during this time."

The court further held that the benefits of accepting the immediate settlement funds outweigh the potential woes of a jury trial. Cavanaugh also agreed to award co-lead counsel in the Schering case more than $4 million attorneys' fees and costs. . . .


Yes -- while securities cases like this one, with excellent evidence of CEO Fred Hassan's alleged securities law misstatements (by ommissions) are rare -- the payouts are usually vast, to the lawyers who see them through. And they earn every penny of it -- with an opponent as wily as Mr. Hassan. [Now, I'm out -- to catch the Marathon.]

The Week That Was. . . Jefferies Lowered Merck -- To $50 (From $54); And "Neutral" Rating (From "Buy" As Late As May 2013)


Not too much price action though -- Jefferies posits that Merck's 8,500 job cuts, and $2.5 billion savings over three years, is not enough.

Whether I agree or disagree with the Jefferies' & Co. specific points of analysis is immaterial. The meta-narrative here is that we all agree: big pharma needs (more generally) to reinvent itself. From the Motley Fool, then:

. . . .Shares of Merck [were] down fractionally, likely because of an analyst downgrade at Jefferies. The firm lowered its rating on the stock from buy to hold and cut its price target on the stock from $54, to $50. Jefferies said deteriorating business fundamentals and a smaller-than-expected cost-cutting program were two of the main reasons for the change. Just recently Merck announced that it will restructure and cut $2.5 billion in expenses over the next few years. . . .

Do stay tuned.

Saturday, October 12, 2013

2.3% Med Device Tax (On Revenue Not Profits!) Might See Two Year Delay: Sen. Collins, In Latest Budget Offer


The medical device excise tax has been especially unpopular (even more so, than most new tax provisions) among device makers like Stryker, Edwards, GE Medical, Siemens and Biotronic -- to name a few. Why?

Because. . . the tax is to be collected (for tax years 2013, and beyond) on gross revenue -- sales -- not net profits. Thus, a medical device company with no GAAP earnings per share may be liable for a tax on 2.3 per cent of its sales, in a given year (accordingly deepening its losses). The thinking behind the tax had mostly to do with creating a revenue stream to offset FDA's accelerating costs in reviewing the burgeoning number of new devices being submitted for market approval. [And, the device lobby was largely asleep at the switch, in 2010.]

To be fair, the devices -- especially hip replacement sets -- have been (disproportionately) litigation targets, and thus are consuming federal court resources, in MDL's, in an accelerating fashion, as well. Even so, if the compromise now being floated delays the implementation of the tax for two years, look for these device makers' stocks to rally by about 2 per cent, largely across the board. [All device makers are required, under GAAP, to have already established reserves to accrue for these 2013 taxes. Those will be reversed, under the Collins plan under discussion.]

Bloomberg reporting on the emerging proposals here, then:

. . . .A deal built around repealing the medical-device tax would be a “hollow victory” and further divide Republicans, said Representative Tim Huelskamp of Kansas, one of the House Republicans still pushing to dismantle the health-care law.

It would still fund 98 percent of Obamacare,” Huelskamp said of the latest Republican proposal. “That won’t be sufficient for conservatives and will be seen as capitulating to the left. . . .”

Collins’s plan would pair provisions to raise the debt ceiling and end the shutdown with a two-year delay in the medical-device tax. It would change pension rules to offset the lost revenue from the device tax. . . .


Obviously, these discussions are fluid -- and much may change over the long Columbus Day weekend, but a delay on the tax won't dent the ACA rollout in any meaningful way, while still allowing Republicans to say they got some change to Obamacare. Silly -- but I get it. And it would be good news for the likes of Edwards LifeSciences, for certain.

UPDATED | 10.13.13 @ 1 AM EDT: It would appear that House Republicans will not support the above Collins compromise proposal. On Wall Street, stocks may generally decline, come Monday, on increased risk of a federal debt default, come Thursday, should Congress remain gridlocked.

Thursday, October 10, 2013

Fred Hassan: "I'm An Unusual Leader. . ." Really? You're A. . . Leader (At All)!?


That would be quite a bit of news -- to me, at least.

You can read more of his revisionist histories right here (via Yahoo! Finance), in greater detail, but to my eye, they are all largely gag-worthy.

His central claim to "changing the corporate culture" at legacy Schering-Plough is apparently that he once or twice stood in line with a cafeteria tray. . . and got his own food (gasp!), with the rank and file. [Eye-rolls mandatory here.] The concluding bit is especially unctuous:

. . . .“I'm an unusual leader,” he said. “I will leave it up to whoever wants to judge me, to see whether I'm good or great, but I am a very unusual leader. . . .”


Ahem, Fred -- there is at least one other option: poor.

And I'd choose that one for you -- 2,400 posts below, over almost five elapsed years, are offered to establish that proposition. But you may make the call, yourself, dear readers.

Tuesday, October 8, 2013

Matt Herper, On Merck's "No-Change" In Strategy. . . Erh, Change In Strategy(!)


I've long admired his ability to cut to through the thicket, and eliminate pharma-jargon, in his writing.

This may be as fine an Exhibit A as I've run across, for Matt Herper's keen use of prose. None of the buzzwords and euphemisms so common in Perlmutter's and Frazier's speech-ifying, appear in Matt's writing.

And that, my friends, is for all of our educational benefit. For if Joseph Joubert said that "Words, like glasses, obscure everything which they do not make clear. . ." -- then Merck's leadership needs a new prescription, it seems. Certainly so, at least insofar as their press-writing is concerned, in my opinion.

But Matt takes these two luminous speakers (Frazier and Perlmutter), and renders them clear: i.e., this now is no longer the old MRL "big science -- for big questions" approach, at all. No, this is the nimble, fast, small and stealthy approach -- looking for spiders under just a few rocks, high-up, above timber-line, on a remote mountain, where no one has yet been kicking about. We shall see how it turns out. In the mean time, here is the concluding bit from Matt's piece -- do go read it all:

. . . .Frazier, despite saying that this is the beginning of transformational change, also insisted on a conference call with analysts last week that Merck is not changing its strategy. He notes that Merck is not entering new businesses, like generic drugs, nor spinning off units like its veterinary or consumer units – although he says Merck is constantly considering whether those businesses work better inside Merck, or outside it.

“Maybe this may strike you as a better way of saying it,” he told me. “The what of the strategy is exactly the same, the how of how we execute the strategy across the company, especially in our commercial and R&D organizations, is a little bit different. We are being much more precise about where we allocate resources going forward, and that to me is what the distinction is.”

If Frazier and Perlmutter are going to bring Merck back to its former place as the most respected of companies, they’re going to need to make that “a little bit different” sound like the understatement of the year. . . .


Nicely-put, Matt. Nicely-put indeed. Do go read it, one and all.

Monday, October 7, 2013

Merck To Record $1.1 Billion Charge In Q3 2013 -- About $670 Million Is A Cash Charge


Not surprising, but still a heady number.

From last week's SEC filed Form 8-K, when the closing of Summit was announced, along with the additional 8,500 job losses, then:

. . . .The Company expects to record charges of approximately $900 million to $1.1 billion related to this program in 2013, a majority of which will be recorded in the third quarter. The Company estimates that approximately two-thirds of the cumulative pretax costs will result in cash outlays, primarily related to employee separation expense. Approximately one-third of the cumulative pretax costs are non-cash, relating primarily to the accelerated depreciation of facilities to be closed or divested. . . .


We will keep you posted.

Friday, October 4, 2013

Goldman Sachs Moves Merck's "Near Term Target Price" Up -- To $54. . . In Wake Of Layoffs


UPDATED | 10.04.13 @ 8 AM EDT: Erstwhile commenter Dave (at the back-up site) recommends this linked story @ (Philly.com), as proof of the "sugar in the gastank" metaphor, below. He is right.

As is often the case, Wall Street loves the one time, and ongoing, savings created when public companies announce massive layoffs. In the near term, the reduced expenses fall straight to the EPS line as earnings increases of like amount. This is so, even if longer term, the cuts are akin to dumping a cup of sugar into company's growth engine (and I personally think that may be the case here, in fact).

And so, in the wake of Merck's latest 8,500 job cuts (targeting $2.5 billion in savings) while I was busy with my day gig(s), my friends at Goldman Sachs (i.e., "the smartest guys in the room" -- just ask 'em!) upped Merck's near term price target to $54 (from $52, if memory serves).

To be clear, I believe this research by Goldman conforms to the standards of Regulation AC -- I am just amused, all the same. Here is an MSM report on the item:
. . . .Merck & Co (NYSE: MRK) had its price target upped by Goldman Sachs Group Inc. to $54.00 in a research note issued to investors on Tuesday, Analyst Ratings Network reports. . . .


Of course, I remain quite skeptical about whether Goldman Sachs can ever offer completely independent research on Merck. The latest iteration of that back story -- from July 2013 -- is under that last link.

[I think the earliest version of just such a Goldman story I ever wrote was in early 2009, here.]

Namaste, one and all -- I'm off the grid for a what may turn out to be quite a bit of time. Keep it spinning in good karma!

Thursday, October 3, 2013

USDC (NJ) Judge Cavanaugh Grants Plaintiffs' Attorneys' Fees Of Over $116 Million In ENHANCE/Vytorin Securities Class Action Cases


I'll simply note that these attorneys earned every penny.

They did a great job -- in the face of Mr. Hassan's endless obfuscations. . . from the order and opinion, entered Monday, then:

. . . .The facts of this case are well known. The Settlement for the Schering Action provides for the payment of $473,000,000 in cash. The Settlement for the Merck Action provides for the payment of $215,000,000 in cash. Lead Plaintiffs for the Schering Action filed a Motion for Final Approval of Class Action Settlement and Plan of Allocation on July 2, 2013 (ECF No. 423). Lead Plaintiffs for the Merck Action also filed a Motion for Final Approval of Class Action Settlement and Plan of Allocation on July 2, 2013 (ECF No, 333). . . .

[The court awards] attorneys’ fees in the amount of 1 6.92% of the Settlement Fund (including interest earned on the fund amount); 2) grant the motion of Co-Lead Counsel to be reimbursed for expenses in the amount of $3,620,049.63; and 3) grant the motion of Lead Plaintiffs to be reimbursed for costs and expenses in the total amount of $102,447.26. . . .

. . .[T]his Court grants both Motions for Final Approval of Class Action Settlement and Plan of Allocation and adopts The Report in its entirety. . . .


So it goes. Payouts to damaged investors could begin before Christmas, now.

"For Sale" Signs Hung By Merck -- In Summit, New Jersey


Again, this sort of a move has been telegraphed by Whitehouse Station for months, but the announcement on Tuesday made it official: the main Summit campus is closing, and is for sale. [My older Animal Health biz backgrounder (legacy Organon/Schering-Plough), which is continuing some operations there, through 2015, is here.]

Do go read the local account in Patch.com, on the Summit city council's thoughts, and deliberation -- about how to replace, or at least mitigate, the loss of $9 million per year in real estate taxes. Tough times indeed.

. . . .Summit Mayor Ellen Dickson and members of the city's Common Council met Wednesday with Merck officials following Tuesday's announcement that the pharmaceutical giant will close its Summit campus amid global restructuring. . . .

"We are doing all we can to make this a smooth transition," Dickson said. "They are only now beginning to fully assess the 88-acre property, and acknowledge that is truly is a wonderful campus. Merck is looking to find a similar buyer who may be able to immediately use it for like purposes."

The Summit site, where 1,800 Merck employees work, paid the city $9 million in taxes annually. The campus will remain open through 2014 and exit in 2015. . . .


As ever, we will keep you posted.

Tuesday, October 1, 2013

Merck Chops Another 8,500 Science Jobs



Go read pharmalot on it all -- Ed's got the best context on the news.


The goal is to save $2.5 billion. Ugh. Back when I have a chance.


. . . .. . .