Monday, March 31, 2014

By Midnight Tonight, 9.5 Million Previously Uninsured Americans Will Have Basic Health Insurance: "Ah, The Smell Of Victory!"


With public sentiment now shifting, and a slim majority of Americans declaring that they are either neutral on, or in favor of Obamacare (as opposed to those who want to see a major Republican-led overhaul of the ACA of 2010, or an outright repeal) -- we may safely say that when the dust settles -- and all the last minute signups are complete. . . Obamacare will have exceeded its targets.

That in turn means he has acheived the greatest expansion in health insurance coverage in at least fifty years (but it is over three-quarters of a century -- if one strips out military family benefits enhancements, granted not too long after the second world war ended). That also means that millions of children who have never had health care coverage may now go see a doctor for well-care. The economic benefit -- system wide -- to preventative health care, from an early age, is incalcuably vast. A bit -- from the Chicago Tribune this morning, then:

. . . .President Obama's healthcare law, despite a rocky rollout and determined opposition from critics, already has spurred the largest expansion in health coverage in America in half a century, national surveys and enrollment data show.

As the law's initial enrollment period closes, at least 9.5 million previously uninsured people have gained coverage. Some have done so through marketplaces created by the law, some through other private insurance and others through Medicaid, which has expanded under the law in about half the states.

The tally draws from a review of state and federal enrollment reports, surveys and interviews with insurance executives and government officials nationwide. . . .


And, overall, big pharma, via PhRMA, is behind the initiative -- it will offer the companies far more customers. And ones who are able to pay (at least a sensible amount) for prescription drugs. This is a bull-market day for pharma, biotech and life science companies in America. Now we get about the small details of fine-tuning the health care reform measures -- to work better, in the more unusual cases -- the oddities and outliers. Do stay tuned.

[NCAA bracket update: With Mr. Obama's Spartans tumbling on Sunday, and my 'Gators hanging tough -- I can now tie him, if the 'Gators win it all. Any other outcome, and he beats me by 5 to 30 points. Should be hilarious here at the end -- but UConn will fall to Florida. Bank on that. And in the title game, I still like Florida -- over all others.]

Sunday, March 30, 2014

Rumor 2: If -- As Second Anon. Commenter Suggests -- It Is Assets Only; No People Or Plants. . .


To be clear -- this too is mere anonymous conjecture.

However, if nothing but the IP portfolio (brands, word-marks and trademarks/ licenses and product-line know how and patented methods/compositions of matter rights) are being sold, then I'll still say that 3.2 times sales (net of Merck's then-internal INCREASED restructuring charges -- see next paragraph) is a pretty fair guess. Who knows how it will shake out?

As is typical in such "IP strip out" transactions -- if Merck doesn't transfer the bulk of the Consumer Heatlh people in the deal, Merck will be on the hook for perhaps another billion dollars in severance, facility/plant closings and restructuring expenses. Those will need to be deducted from the price the IP only buyer is paying -- If announced at the Q2 earnings call.

Personally, I think part of the Merck goal in the purported Consumer Health sale will be to transfer some facilities, some people [and off-load some associated debt]. If it goes as an IP strip, we won't know for quite a few quarters what the net cash figure was to New Merck. We will have to see the size of the additional restructuring charges. As ever, then -- we shall see. Here's the latest comment:

. . . .Anonymous said. . .

. . .Popular thinking is that Canan was told he would not be CFO that sent him to the exit. He was a lifer at Merck and I cannot imagine he'd be happy one step from the pinnacle of finance. I worked as one of his directs for several years about 10 years ago. He would have made a great CFO.

[Editorial Redaction: The EVP and Chief Strategy Officer] was hired to essentially install the China presence. This was back when we had more than PD-1 in waiting. No surprise at all that he left/was let go considering the new strategy will be licensing deals.

The Consumer sale will be public before the end of 2Q, very likely by tax day. This money is to feed the PD-1 piggy. Last I heard the assets alone are being bought - the staff will not transition to the buyer, at least not a majority. One potential buyer is likely not to take manufacturing assets, either. . . .

March 30, 2014 at 10:31 AM. . . .


Thank you so much! Truly. To be clear -- I personally expect Merck will transfer most of the people, and a good bit of the related hard asset-base, in any such deal. But I could be mistaken. Now -- sit tight! -- we wait and see.

Sunday Morning Rumors -- In Comments -- Related To The Lower Than Expected Selling Price For Consumer Health?


It is a lazy Sunday morning, so as I sip my coffee. . . I'll let my imagination wander, and muse, about potentially. . . connected events. Emphasis: potentially.

First -- this is a rumor only -- and I have some smallish reasons to be. . . skeptical. [So his name will not appear in the post.] After all, the gentleman suggested in comments as having departed along with Mr. Kellogg is a Section 16 reporting officer of Merck, under applicable SEC rules. That could mean, under at least some readings of the SEC Form 8-K instructions -- that he should have been named, along with Mr. Kellogg, as departing -- if the two were departing as a part of a single plan. The contra argument is the better one though -- it runs that he is not a "principal" officer in any sense (Under Form 8-K, Instructions for Section 5.02(b)); nor is he in charge of reporting or finance, overall. He is listed as being in charge of the Merck Global Innovation Fund, an investing arm. On balance, then, I am comfortable saying his departure need not be disclosed immediately under the SEC Form 8-K rules. So, I now have reason to believe my anonymous commenter's veracity here.

The commenter below reports overnight that the EVP and Chief Strategy Officer is also leaving Merck, with no immediate next job lined up. If that turns out to be true, it occurs to me that each of the three most recently departing executives may have predicted to the board that the Consumer Health businesses might fetch more than $10 billion -- if sold. And by my lights, the actual bids are likely going to be more than 30 per cent below that figure.

Almost certainly, by late last week, Merck knew whether any such bid was potentially going to be north of $7 billion. As I speculated just yesterday, if so, that would likely be a European or UK buyer, as the dollar demoninated Consumer Health sales here, would translate into a higher currency figure, "over there" when repatriated, or simply consolidated up, and reported under a non-US home office company. That might justify a higher price.

In any event, overall, if these executives expected $10 to $12 billion, and are only getting a little shy of $7 billion, Merck may (embarrassingly) announce that it is abandoning the sale idea, and will be looking at other options -- like a split or spin -- direct to existing Merck shareholders. [And, fascinatingly, incoming CFO Rob Davis has deep experience in such transactions, at Baxter and Lilly.]

Again, all of that is idle conjecture, on a Sunday morning. Take it as such. We will of course wait and see.

But I'd not expect any immediate announcement next week -- unless Merck has found a patsy willing to pay more than $10 billion. And I now very much doubt that. But I'd LOVE to be proven wrong here. Be excellent to one another! [And "Go Florida!" -- keep my NCAA bracket chances alive. . . . Neither Mr. Obama or I had Wisconsin to get by Arizona. Hmmm.]

Saturday, March 29, 2014

Brash Predictions Department: Anyone Paying More Than $7 Billion -- Is Overpaying For Old S-P Consumer Health


Okay. Apparently Mr. Frazier (whom I respect and like) was on a Fox Business News show. . . and said he had "heard of" some numbers above $10 billion -- for Merck's consumer health businesses. Final bids on these almost exclusively legacy Schering-Plough assets are due by Monday night.

Based on all the rumor pieces about which companies are bidding -- if any one of them pays more than $7 billion (or 3.2 times trailing year's sales revenue) -- they will be overpaying.

I said so just before Valentine's Day 2014 -- and I say so again now. Of course -- Mr. Frazier, as honest a guy as he otherwise is -- has a powerful incentive to try and get people to sweeten their bids, right at the end, here. The reputed U.K. bidder is the most likely one to fall for this ploy, as I suspect it is already at the higher end of what would be fair value. So Mr. Frazier appeals to their fear of losing the contest -- hoping they will overpay. That's smart business negotiating, true enough.

And so, if someone pays north of $7 billion -- it is likely to be a United Kingdom (or less likely, and EU) firm, and that firm will have. . . overpaid.

This is simply not a high growth, high margin set of businesses. And we all know this group of assets needs some investment -- to start to turn the corner, and meaningfully increase sales. Last year, sales were flat to down, depending on how you decide to include or ignore currency effects.

And not entirely coincidentally, that would be why an EU (or even a United Kingdom -- or less likely, a Japanese) buyer might be able to defend a slightly higher price. Such a firm would see currency-driven tailwinds at the sales line. By way of contrast, a US firm will face some real currency headwinds at the sales line -- and would need major "natural" hedges in the EU, to offset. Such a US firm would own substantial plant and equipment in Europe (or the UK).

And clearly the audaciously fictional Novartis swap rumor is dead. Dead. Now we wait -- but fair value for these assets is about three times trailing sales. That's my $0.02.

Friday, March 28, 2014

So -- To Be Fair -- Both Were Turning 58. . . And Still. . .


Still, it strikes me as odd. . . that both the Controller and CFO retire, without prior hints at the same, and without other jobs immediately announced -- especially during the very hectic year-end book closing/audit/corporate SEC disclosure season. [Thanks & a H/T go to my anonymous commenter for mentioning this story idea yesterday!]

I suspect there will be more news to come on these two positions. I also suspect this signals a significant restructuring in the finance/corporate reporting/corporate audit groups at Whitehouse Station. Or. . . something more(?). We shall see.

Add to the surprising coincidence above, that Mr. Davis is getting around $13 $10 million -- in signing bonuses and PSUs -- that is easily twice what had been considered "in-market" -- even for Fortune 50 CFOs. Is that some sort of prospective "clean-up" pay? An inducement to take on significant new reputational risks? Who knows?

And to be fair, Rob leaves a huge pile of cash on the table -- by walking away from Baxter, in the middle of a split transaction to boot. All his unvested stock options, restricted stock and bonus payments (and pension enhancements) will not vest. I doubt he really left a $15 million opportunity though. I guess Mr. Parkinson could have been pushing Rob out -- at Baxter, so that Parkinson himself would have the seat as head of the Med biz, post-split, too. But that seems unlikely. No, Rob was likely at the height of his powers at Baxter. And he likely convinced Merck's team that he needed. . . additional inducements -- last night I didn't count his additional $3 million, in PSUs. . . so the total is $13 million to walk in the door at Whitehouse Station. Wow.]

Of course, it could be that both senior Merck finance and audit executives decided that when they hit 58, they'd take stock of their priorities -- and cash-out their respective many years of options -- and call it. . . a pair of careers. It is possible. But unusual -- to be so close in time. [UPDATE: Unrelated NCAA bracketology -- going into tonight's games, Mr. Obama is ahead of me by 48 points. I can catch him if Michigan State stumbles, otherwise it will likely be his to win.]

Thursday, March 27, 2014

Rob Davis Signing Bonus: $5 Million Cash -- Another $5 Million in Restricted. Wow.


Hot from the SEC's EDGAR window. Amazing -- even by very big pharma standards.

Mr. Davis is one hot commodity. $10 million in signing bonuses. As sign-on pay? Wow.

. . . .Sign-On Bonus:

. . .The Sign-on Bonus will be payable in three installments as follows: (i) $2,500,000 (less applicable payroll deductions and withholdings) will be payable on or about your first regularly scheduled payday following your start date (“First Installment”); (ii) $1,250,000 (less applicable payroll deductions and withholdings) will be payable on or about the first regularly scheduled payday following the first year anniversary of your start date provided that you are still employed by Merck or one of Merck & Co., Inc.’s subsidiaries as of such date (“Second Installment”); and (iii) $1,250,000 (less applicable payroll deductions and withholdings) will be payable on or about the first regularly scheduled payday following the second year anniversary of your start date provided that you are still employed by Merck or one of Merck & Co., Inc.’s subsidiaries as of such date (“Third Installment”) (individually and “Installment;” collectively, the "Installments").

Your right to receive an Installment is conditioned on your continued employment by MSD or a Merck subsidiary on the date the Installment is due. If, however, MSD or Merck terminates your employment for reasons other than Cause (as defined below) prior to the due date of an Installment, then any such Installment will remain payable in accordance with the original payment schedule as if your employment had continued through the due date.

You will be required to repay each and any paid Installment in the event that your employment with MSD or a Merck subsidiary ends prior to the twenty-four month anniversary of your start date as the result of either (a) a decision by you, regardless of reason or (b) a decision by Merck for reason of Cause (as defined below) (“Repayment Event”). For avoidance of doubt, the cessation of your employment by reason of your death or your inability to work due to a disability is not a Repayment Event. By your signature below, you agree that, upon a Repayment Event, you will tender a check to MSD in the full amount of any and all Installments that had been paid to you.

Restricted Stock Unit (RSU) Grant: You will be recommended to receive a RSU grant valued at approximately $5,000,000 (“Sign-On Grant”). Merck RSU grants are currently scheduled to be made shortly after the release of Company earnings each quarter. The date of your grant will be the quarterly grant date immediately following your start date. Subject to its terms, the Sign-On Grant will vest fully on the third anniversary of the grant date (“Vesting Date”). . . .


There will be more to this story -- most likely -- come earnings conference time. That's April 29, before the NYSE opens. You may bank on it.

Go Read Ed Silverman -- Now At WSJ! -- Vioxx® Legacy Disclosures


He's got a great new one up -- on Vioxx® legacy litigation matters.

Seriously -- just read it all. I can't do it justice. Ed's is the genuine article -- served cold, to boot.

. . . .In a little-noticed ruling, a Kentucky state judge has permitted a Brown University professor to seek disclosure of countless Vioxx documents that were marked as confidential during years of litigation over the controversial painkiller. . . .

Vioxx, you may recall, was a highly controversial and widely prescribed painkiller that Merck withdrew a decade ago over links to heart attacks and strokes. However, the documents allegedly contain fresh information about the extent to which the drug maker disclosed side effects on a timely basis and its handling of clinical trial data. . . .


The guy simply never misses a beat. And he's a trusted friend. Do trust him -- he's one savvy pharma/bioscience journo.

Rob Davis Named CFO -- Ex-Baxter CFO; Ex-Lilly Tax Guru -- Now At Merck


I'll be back with more later, but there is much much more -- behind the scenes -- in this move.

And I've got it all -- what to disclose? What not to disclose? A vexing scruples question, now.

Baxter disclosed this morning that it is splitting in two. And it also disclosed that long time Chairman Bob Parkinson would be the head of the Med side; Ludwig Hantson will head the biosciences side of the new house.

One might opine that the new splitco arrangements left Mr. Davis without a seat of adequate. . . girth. One might also wonder when Mr. Kellogg will next resurface. I have much, much more -- but that is all I can ethically and lawfully share right now.

From the news item, then:

. . . .Merck announced the appointment of Robert M. Davis, 47, as executive vice president and chief financial officer, effective April 23, 2014. Davis, who will also oversee corporate strategy and corporate business development, will succeed Peter N. Kellogg, 58. After having made significant contributions to the company as Merck’s CFO since 2007, Kellogg will work closely with Davis to ensure a seamless transition and will leave Merck on May 16. . . . "Rob is an accomplished executive with significant financial and operational expertise, including as a CFO, and will be an exceptional addition to our team," said Kenneth C. Frazier, chairman and chief executive officer, Merck. . . .

"Peter [Kellogg] has been an important member of the Merck leadership team and instrumental in helping to guide Merck during a period of significant change at our company and in our industry," said Frazier. "Peter leaves Merck a stronger company, better positioned to deliver long-term value to our shareholders. . . ."

"I am extremely proud of what we have accomplished together during my seven year tenure at Merck," said Kellogg. "And while I am excited to open another chapter of my professional life, it is heartening that I can do so having had the opportunity to contribute to Merck’s legacy and long-term success. . . ."


I've got an intervening one -- from my buddy Ed, at the WSJ -- up next.

Wednesday, March 26, 2014

In Re PhRMA's General Counsel -- "Me Thinks That Lady Doth Protest Too Greatly"


Some PhRMA members, Merck included, are taking a PhRMA promoted stand -- that they will no longer offer "patient assistance" money -- to Obamacare participants. While it is true that the law is unclear, and in flux, at the moment, the GC of PhRMA sounds a bit like Lady MacBeth here.

How so? Well, the proof is that Amgen -- and five other of the major PhRMA members -- will still offer patient assistance while the rules get sorted out. [Pfizer and AbbVie won't disclose what they intend to do.]

The genuinely-arguable issue here is that -- as to people receiving Medicare and/or Medicaid or the federal exchange coverage, the patient assistance money might -- MIGHT(!) -- be deemed a prohibited "kickback" of some ill-defined sort -- until the rules are really, and finally, cleaned up. But the wiser advice (IMHO) would be to accept that helping the poorest Americans won't be deemed a crime -- specific intent to violate the law is a constitutional element of any such criminal charge. And intent to help patients stay on meds is not intent to pay kickbacks. Q.E.D.

It seems the majority of "the majors" agree with my advice. Amgen, Novartis AG, Sanofi, Eli Lilly & Co., Gilead Sciences Inc. and Johnson & Johnson among them. Here is the Bloomberg piece -- do read it all:

. . . .Merck, based in Whitehouse Station, New Jersey, is the world's fifth-largest drugmaker by market capitalization, while Glaxo, based in London, is the seventh-biggest. New York-based Pfizer Inc., the world's fourth-largest, and AbbVie Inc., based in North Chicago, Illinois, declined to disclose what they're doing.

Amgen, meanwhile, is joined by Novartis AG, Sanofi, Eli Lilly & Co., Gilead Sciences Inc. and Johnson & Johnson as companies that said in interviews they'll continue the practice. . . .


True enough -- it is a shade of gray, at the moment -- but PhRMA is willing to use it, wantonly -- to bludgeon the government. And they are doing so by smacking the nation's poorest sick people in the head, with that "yank the money" club. Ugly. That's just a little beyond the pale, where I come from.

Tuesday, March 25, 2014

NYT Editors Are Right -- PhRMA Is Running An Ill-Informed, Unfounded Scare Campaign


We all know that buying from just any online drug spam mailer would be stupid -- and dangerous. That's true. But this is not that. [Background here -- the latest one, of about twenty I've written on the topic. Search "reimportation" in the upper left-hand search box -- for the rest.]

This morning, the editors of The Gray Lady lay out a very calm, sensible, and data driven argument in favor of reducing the medicine costs for the lower one third of our population, by allowing reimportation -- sanctioned, licensed reimportation. [And I will offer that this is the logical implication of their well-taken argument.]

In the mean time, they advocate buying from reputable online pharmacies. In almost every case, the buyer is getting the very same drug, from the very same manufacturing line, at a plant in Puerto Rico or Costa Rica or New Jersey, from the very same branded drug maker, as they would obtain at the local brick and mortar Walgreens or CVS -- but at a mere fraction of the price.

Fifty million Americans a year do not fill prescriptions their doctors write, or do not pick them up, because they cannot pay for the drugs. That is a national tragedy, and likely increases the costs, overall, to the health care system -- when these very sick, unmedicated people finally present at -- you guessed it, the local ER. That, my dear readers, serves no one. Not even the PhRMA member companies. But from at least 2006 through 2008, that political hack Billy Tauzin, a Republican and former Congressman out of the Bayou State -- sitting as the head of PhRMA -- shoved that preposterous agenda down the throats of the American public.

It is time for the government payors to negotiate, en masse, with both generic and branded pharma and biologics makers -- with the goal of reaching sustainable pricing for people who qualify by lack of income for food stamps. It makes no sense that the poor in India and China and now Egypt are getting drugs at one-one-thousanth the price that people making less than $14,000 per year are charged here in the States. These drugs are as as far out of reach to poor Americans as they are for poor Indians or Egyptians. Here is the op ed -- do go read it -- and a bit:

. . . .There are no reported examples of Americans dying by taking real, but F.D.A.-unapproved, medication bought online from a foreign pharmacy that requires valid prescriptions. This is after tens of millions of prescriptions have been filled online and internationally over the past 15 or so years, since online pharmacies were created. . . .

But for drug makers, the overseas ordering means lost profits. In 2003, the drug companies were frustrated by growing numbers of Americans buying cheaper medications from Canada. The Pharmaceutical Research and Manufacturers of America [PhRMA] hired the Edelman public relations firm to figure out what to do. Using focus groups, Edelman surveyed Americans and discovered that the federal law was not a deterrent. The industry concluded that the fear of ingesting dangerous or counterfeit drugs would do more to deter people from buying overseas. Since then, the drug companies have tried to play up that risk through public education and media campaigns.

If the F.D.A. wants to protect drug makers from lower-cost imports then it should say so and tell Congress to more aggressively enforce the law. Its officials should not equate counterfeit and imported drugs. This erroneous conflation will make it more likely that regulators will seize and destroy people’s imported medication. Legal or not, that would be downright unethical. . . .


Indeed. Do go read it all -- there is a recommendation of a website from which safe meds may be ordered (shipped from Canadian sources). [This one is the result of my continued thinking -- about the global prices charged for revolutionary, life-saving medicines around the world -- see the last six or so posts, below.]

Monday, March 24, 2014

FierceBiotech -- Channeling WSJ -- On BMS's Likely Lead In Anti-PD-1 "Next Gen" Cancer Therapies


And, even so -- in an echo of the Hep C discussions I've been highlighting -- the WSJ and FierceBiotech point out that we in the US may have reached a breaking point, on pricing of new drugs. Even revolutionary new drugs (and immunotherapies -- like Nivolumab and Pembrolizumab -- which are techincally biologics, not drugs at all, per se). Doubly so, with the ACA of 2010 kicking into high gear on cost containment measures.

Do go read both, but you'll need to pay the subscription to read all of the WSJ piece. Here's a bit from Damian Garde, writing for FierceBiotech:

. . . .All three could win FDA approval before the end of 2015, and, thanks to stellar results and the potential for combination treatments, analysts expect the drugs to peak at about $12.5 billion a year, WSJ notes, with Bristol-Myers claiming the lion's share. None of the companies is ready to talk about pricing, but Citi told the newspaper that PD-1 treatments could cost as much as $240,000 once they make it to market, far outstripping the costs of current vanguard therapies like Bristol-Myers' Yervoy. . . .

[W]ith all three PD-1/PD-L1 blockers expected to hit the market at around the same time, competition and discounting may undercut some of the rosiest projections of peak sales. More importantly, though, the mounting public fervor over the cost of medications could alter expectations for all three companies. Some of the most impressive immunotherapy data have come from studies combining newfangled therapies with other pricey cancer meds, meaning the highest odds of patient success will likely come from doubling up six-figure treatment regimens. To date, payers have been willing to shell out for efficacious cancer drugs, but the expected leap in costs for PD-1 drugs could create a "completely unsustainable" pricing situation, Institute of Cancer Research Deputy CEO Paul Workman told the WSJ. . . .


Just as we've been saying -- with some new clarity likely due, come June at ASCO in Chicago. Stay tuned.

As Long As We Are Talking Material Upcoming Scientific Conference Submission Deadlines: ASCO 2014


Just a quick update -- on what to expect, and when -- related to the MK-3475 (called pembrolizumab, formerly lambrolizumab) vs. BMS Nivolumab cancer horse race. This is likely to be a material horse race, for Merck's overall future earnings power. [Largely immaterial Liver Congress update, here.]

ASCO deadlines this year are as follows (the press will be released from embargoes on June 1, 2014).

. . . .March 12-13 | Scientific Program Committee meets to select abstracts

Late March | Abstract notification letters sent by email to first authors regarding selection decisions

April 1 | Late-Breaking Abstract submission deadline

Mid-April | First authors of Late-Breaking Abstracts are notified of final selection decisions

April 10 | Deadline to withdraw an abstract

April 21 | Abstract titles released as part of the Annual Meeting iPlanner launch

May 14 | Abstracts released on ASCO.org. . . .


So -- we may get some insight as to which companies will be presenting what data, later this week -- out of ASCO 2014 (on cancers, including melanoma, and solid organ tumors), in much the same way that we received the 2014 Liver Congress pressers (on Hep C), this morning. Do stay tuned. These ASCO releases might well be material to Merck, overall. Especially if BMS discloses that it is further along with Nivolumab than Wall Street imagines it is.

Additional MK-5172 & MK-8742 Phase II Hep C Clinical Trial Data To Be Disclosed -- At Liver Congress: Good News


On the morning of April 9, 2014, in London, the next annual Liver Congress™ opens. That morning Merck will reveal additional data from several ongoing PhaseII/IIb studies it is conducting on its next gen Hep C candidates.

These candidates will -- if ultimately approved -- enter as "me too" competitors to Gilead's front running Solvadi®. It should also be noted that Solvadi will likely have cut its prices wildly, in the developing world (reducing Merck's opportunities there) -- and with Congressional committees pounding on pricing here, it won't be a pretty picture at home. At least not likely to be an easy $100,000 plus per patient juggernaut, now -- not for the "me too" entrants.

This is good news for Merck -- make no mistake. It is also good news that Merck is entering Phase III with at least one study here. It may just not be materially good news, given Merck's overall size. In any event, here is a bit of the press release, this morning:

. . . .MK-5172 an investigational HCV NS3/4A protease inhibitor and MK-8742 an investigational HCV NS5A replication complex inhibitor – are scheduled to be presented at the 49th Annual Meeting of the European Association for the Study of the Liver (EASL) also known as The International Liver Congress™ 2014. The data are from Merck’s overall Phase 2 clinical program. The meeting will take place in London United Kingdom April 9 - 13 2014.

Based on the results of the Phase 2 program Merck is initiating a Phase 3 clinical trial program to be named C-EDGE. The C-EDGE program is designed to evaluate these investigational treatments across genotypes and in different HCV subpopulations including patients with chronic kidney disease HIV/HCV co-infection and cirrhosis. . . .


As I say, this is a big market, but Gilead has, and will have, a likely multi-year "first mover" advantage, in Hep C, by the time these two clear all the regulatory baffles. It will help Merck that it will have HIV/HCV co-infection data in its favor when approved. But that won't necessarily make it a mono-therapy, first line treatment, even in that arena. Do stay tuned.

Sunday, March 23, 2014

Gilead to Sell Solvadi® Hep C Cure -- In Egypt (Just Like In India) -- At About $10 Per Pill. . . . Vs. $1,000 In US


Sunday morning fare: how the eradication of one public health crisis in Egypt -- led to another. And now, US pharma is pitching in to solve the second crisis.

So, this story (from our perspective) begins in the 1970s, when public health officials undertook a very broad based effort in Egypt to eradicate the scourge borne of unclean water known as schistosomiasis. Since at least the first century BC, Egyptians have been dying of the wasting disease. It is trasmitted by fresh water worm larvae usually transported by snails. By the middle of the last century nearly one per cent of Egypt's population was known to be infected. So a humane effort was undertaken to eradicate it. [Clean drinking and bathing water have eradicated it in the post-industrial world.]

In Egypt in the 1970s, the most cost-effective treatment was a simple one dose injection, and in order to conserve resources, Egyptians reused what turned out to be dirty (Hep C contaminated) needles -- to treat perhaps hundreds of thousands of schistosomiasis sufferers. These people, of course, in turn, developed Hep C in the 1980s and beyond, leaving Egypt with yet-another crushing public health burden -- now, nearly 1.2 percent of Egypt's population carries Hep C.

With Gilead's new all-oral drug launch, the eradication of Hep C is within reach for Egypt -- in reach, except for the $84,000 price tag, per patient. [In fact, Congress is now asking (and pointedly so) after that figure, here in the US.] So it is good news for access to medicines advocates at local Egyptian Doctors Without Borders offices that Gilead has struck a $10 per pill deal to treat Egypt's poor [and similar deals are in process in India and China]. Even so, $900 (the full course of the Egypt-priced treatment) is likely beyond the reach of half of those carrying Hep C. It does mean about one half of one per cent of Egypt's overall population may be cured of the disease, though. "Every little bit helps," right? Every little bit. . . and this is monumental -- Gilead will cut the burden of Hep C in half in Egypt, and pretty quickly so.

From local Egyptian papers, as of Saturday morning, US time -- do go read it all:

. . . .Gilead Sciences, facing mounting criticism over the high price of its new hepatitis C pill Sovaldi, has offered to supply the medicine to Egypt at a 99% discount to the US price.

While the drug will still cost $900 for a 12-week course of treatment, that is a fraction of the $84,000 charged for a course of treatment in the United States. . . .

Gilead said it was “pleased to have finalised an agreement” for the introduction of Sovaldi in Egypt, which has the highest prevalence rate of hepatitis C in the world.

“We believe Sovaldi could have a major impact on public health in Egypt by significantly increasing the number of people who can be cured of hepatitis C,” Gregg Alton, head of corporate and medical affairs at Gilead, said in an emailed statement. . . .


While the percentage of Egyptians suffering with Hep C is the highest on the planet, by far the greatest absolute number of people with the disease live in India, and in China. This is plainly the right thing to do -- and both China and India already have secured similar agreements from Gilead, if memory serves. Well-done Gilead, and CEO Milligan.

And almost inexplicably -- it is snowing here again -- at nearly the end of March. Time to stay by the fire and read a good book -- say one on what happens when a wealthy US scion disappears, in 1961. . . in what was Dutch New Guinea. . . and we learn a half century later that he had been honored with local ancestor worship practices. That is. . . he was. . . made dinner (both meanings plainly intended).

Friday, March 21, 2014

Merck Will Host Q1 2014 Call At 8:00 AM EDT on Tuesday, April 29


This will be the next comprehensive look at Merck's financial performance. Management may appear at one or two investor conferences between now and then, but it won't be a real drill down on the current financial results.

So do tune in then -- we will, too. Here's a link to the MarketWatch NewsWire story of yesterday:

. . . .[Merck] will hold its first-quarter 2014 sales and earnings conference call with institutional investors and analysts at 8:00 a.m. EDT on Tuesday, April 29. During the call, company executives will provide an overview of Merck’s performance for the quarter.

Investors, journalists and the general public may access a live audio webcast of the call on Merck’s website. Software needed to listen to the webcast is available on Merck’s website and should be downloaded prior to the beginning of the webcast. A replay of the webcast will be available at approximately 11:00 a.m. EDT on April 29 and will remain on the website for 12 months. The quarter's sales and earnings news release and supplemental financial disclosures also will be available in the Newsroom and Investor sections of the company's website.

Institutional investors and analysts can participate in the call by dialing (706) 758-9927 or (877) 381-5782 and using ID code number 17424702. Members of the media are invited to monitor the call by dialing (706) 758-9928 or (800) 399-7917 and using ID code number 17424702. Journalists who wish to ask questions are requested to contact a member of Merck's Media Relations team at the conclusion of the call. . . .


Look for currencies to pressure Merck's Q1 results. [Now, with Mercer ousting Duke this afternoon, many a bracket is well. . . busted. Mine included. So too, the President's though. In one of CBS's nationwide pools (sponsored by Quicken), only 16 people picked that particular outcome. There were likely more than a million entrants, as the prize for picking a perfect (error free) brakcet is. . . a cool billion dollars. Sweet. But no one is likely to claim it now. UPDATE: As of Sunday, and the latest upsets, there are no perfect brackets. So, Warren Buffet's insurance bet has paid off. He insured against Quicken having to pay out the billion, on a finished perfect bracket. He keeps the premium, and no one wins the billion.]

Thursday, March 20, 2014

O/T Friday Fun -- NCAA Edition -- Can You Out Pick Yours Truly? Our 44th President?


Feel free to post your guesses -- at our eventual national collegiate champion -- in the comments.

But if you really want to belly-up to the bar, post a link to your verified (major network) bracket.

Let's see if anyone among us can out bracket Mr. Obama (he is quite the bracket maven, you know). He is -- truthfully -- already ahead of me, by about 20 points, on a "plus seed weighted basis". Yikes! His first, then mine (click each -- to embiggify):





Of course, there are some home-picks in mine (and his, truth be told). So it goes. I'll update over the glorious hoop filled weekend, if I am able to pull a little closer to him. And, where is yours -- do tell? Be excellent to one another!

Have a great weekend, one and all!

Dr. John L. Zabriskie Jr. Has Passed -- An Aspen, Colorado Reporter's Take -- And, Merck's Golden Era. . . .


He was truly "a gentleman and a scholar. . . ." He embodied most of what was best about the golden age of pharma/life sciences, here in the United States.

And as irony would have it, he had deep roots at the old, old old Merck Sharp and Dohme, and was, for a time, the most honorable CEO -- and person -- in the room, when Fred Hassan arrived to negotiate to acquire all the shares of Upjohn. [Fast Fred was running Pharmacia then.] So -- at many levels, his obit belongs here. He also had lived in retirement in Boulder, and regularly skied at Aspen Highlands. . . . more connectivity. We wish his family peace -- they are certainly comforted by the fact that he was a man who lived a life in pursuit of outsized ideas -- in science, in business and in life. He leaves behind an entire clan of outsized dreamers, to carry on in his name. Do go read it all:

. . . .John was an accomplished business executive in the pharmaceutical and biotechnology industries. He was a graduate of Deerfield Academy and Dartmouth College. He received his Ph.D. in organic chemistry from the University of Rochester. John was Co-Founder and General Partner of Puretech Ventures and Chairman of the Board, Chief Executive Officer and President of NEN Life Science Products, Inc. At NEN, Dr. Zabriskie led the successful turnaround and sale of the company in a transaction that generated a significant return for investors. Prior to joining NEN Life, Dr. Zabriskie was President and Chief Executive Officer of Pharmacia and Upjohn Inc. As Chairman of the Board and Chief Executive Officer of Upjohn, Dr. Zabriskie led the Upjohn project, which resulted in the $12 billion merger of equals with Pharmacia Corporation. Prior to joining Upjohn in 1994, Dr. Zabriskie spent 27 years at Merck & Company, where he began as a chemist. He held a variety of positions in quality control, manufacturing, marketing, and executive leadership including President of Merck Frosst Canada, Inc., President of Merck Sharp and Dohme, President of Merck Manufacturing Division, and Executive Vice President of Merck and Company, Inc. Dr. Zabriskie served on the Board of Directors of Kellogg Company, Array Biopharma, ARCA Biopharma, and the privately-held PureTech Ventures. . . .


He -- more than many -- marks the passing of a golden era in American life science. And so, the news of his passing will be motivation. Onward. Be excellent to one another -- or if you can't manage that, then at least be a bit kinder than you really have to be. He always managed to.

Wednesday, March 19, 2014

Solvadi® On Track To Eclipse Incivek® As The Biggest Drug Launch In History -- By An Order Of Magnitude


The crown shall be passed some time in April, when Q1 2014 sales data for Solvadi® is made public. We closely monitored the launch of Incivek®, since it was launched head-to-head, with legacy Schering-Plough's boceprevir (and the split was 85-15 in favor of Incivek, back in April of 2012 -- nearly a billion dollars in the first nine months). Now, even that staggeringly fast-start is being pushed into the rear-view mirror, by Gilead. This market is theirs -- for the foreseeable future -- even at the eye popping $1,000 per pill price level.

Do go read it all, over at Investors' Business Daily -- but here's a bit:

. . . .AbbVie and its partner Enanta Pharmaceuticals are already working on a next-generation regime that will treat more genotypes and also be simpler to take. (A common criticism of the 3D is that it's more complicated than Gilead's promised pill-a-day routine.) Earlier this month, Merck also reported very strong phase-two results for its two-drug combo for genotype 1 patients, some of whom were co-infected with HIV. Johnson & Johnson last October acquired three HCV drugs from GlaxoSmithKline, which it hopes to combine with its already approved Olysio into an all-oral regimen. . . .

Sovaldi, meanwhile, has lately been under pressure both for its $1,000-a-pill price tag and concerns about sustainability — after all, one outcome of finding a curative drug is that the patient population eventually shrinks. Still, Morningstar analyst Damien Conover says Gilead has a first-mover advantage and such strong trial data that it likely will be the biggest player for the indefinite future.

"I think we'll have Gilead representing 50% of the hep C market," he told IBD. "AbbVie will take the lion's share of what's remaining. . . ."


So it goes -- but absent some late-breaking surprise at the annual April London conference (abstracts available March 24), this likely puts Merck's next gen Hep C offerings in a third line position. The exception to that might be the population of patients co-infected -- HCV along with HIV. And that is not a small market. Still, Incivek has shown good results in co-infected patients, as a "current gen" (and slightly cheaper) alternative.

Tuesday, March 18, 2014

PhRMA Has Made It Official: Wants India Labeled A "Priority" IP Rights Violator -- By US Trade Representative


Not surprising, since the US has placed India on its watch list every year since 1989, and for three of those, had India listed as a "priority" violator.

Even so, I think PhRMA's sabre rattling does more harm than good -- but here is a bit -- and the full 217 page PhRMA position paper for 2014, under Section 301 (that's one big PDF file):

. . . .PhRMA recommends that India and Turkey be designated as Priority Foreign Countries in USTR‘s Special 301 report for 2014. PhRMA also recommends that the People‘s Republic of China continue under Section 306 Monitoring. The detailed information presented in the country-specific sections below demonstrates that these countries have in place the most harmful acts, policies, and practices, which, in turn, have the greatest adverse impact on the U.S. innovative biopharmaceutical industry.

PhRMA urges USTR to take resolute action to remedy these violations, including the consideration of WTO dispute settlement, as necessary.. . .


We will keep an eye on it, but this one -- as we've long said -- needs cooler, rather than hotter heads.

"Words," like eyeglasses -- Joseph Joubert said -- "obscure everything that they do not make clearer. . . ."

That is especially true of the recent TRIPS rhetoric -- around drug and biologic intellectual property rights, and India's drive to make life-saving medicines more affordable, for her people -- from all sides. We need more grown-ups in the room, people.

Monday, March 17, 2014

Update On The Post Merck Career Of Former CIO J. Chris Scalet


About 15 months ago, we wrote on the "retirement" (from Merck) of J. Chris Scalet. He had apparently retired as a Section 16 officer and Merck executive committee member in July of 2012, but no formal public announcement was made until December of that year -- via an SEC filing.

A court decision was made public, in the online court newspapers, the very same day as the event which Merck disclosed to the SEC was the regulatory event -- that triggered the start of the SEC Section 16 reporting duties -- of his successor, incoming CIO Clark Golestani.

In any event, Mr. Scalet has kept himself quite busy in retirement.

The graphic at right lists his current seat, as CEO of HMA LLC, two board seats and one former board seat -- at a company since acquired by IBM. He was also, prior to his time at Merck, an IT executive at International Paper and MAPCO. From today's Winshuttle appointment presser, then:

. . . .Scalet has served as CIO at three public companies including Merck, a $44 billion pharmaceutical company, International Paper, a $28 billon paper and packaging company, and MAPCO, a Fortune 250 diversified energy company. He developed one of the first shared services organizations at Merck when he centralized technology infrastructure, yielding a nine-figure savings per year in the process. Scalet currently serves on the board of Intralinks (IL), a SaaS solutions provider of secure content and collaboration services, and was a past board member at Netezza Corporation, a leader in data warehouse and analytic appliances, prior to their acquisition by IBM. . . .


So now you know -- what has become of Mr. Scalet, the former CIO of Merck. Thus far, anyway. . . and Happy St. Padraich's -- to one and all!

Sunday, March 16, 2014

NYT Editors Mull -- With Worry -- The Astronomical US Cost Of Hep C "Cures"


While the editors primarily take aim at Gilead's sofosbuvir, branded as Solvadi®, the same set of arguments may be made about Merck (legacy Schering-Plough) Hep C treatment boceprevir (Victrelis®), and Vertex's telaprevir (Incivek®). Each of those now sits a tier below the Gilead offering, which is "best in class," however, now.

Even so -- Merck's "last gen" boceprevir is not inexpensive -- and while the prices in the US for it have been declining (due largely to the arrival of the Gilead offering), it still can cost more than $40,000 for a full regimen. It, like telaprevir may well be life saving.

However, since Solvadi is all oral (and boasts clear efficacy improvements, with greatly reduced side effects), it should present an enormous prescribing advantage. Even so, the Boston-based Institute for Clinical and Economic Review suggested that the Gilead drug ought to be avoided by public payers (because its high price consumes too much of a severely-limited budget resource), and the "last gen" cheaper regimens employed. [That line of reasoning, if widely accepted, would spell trouble for Merck's next gen MK-5172 treatment for Hep C.] By the Boston non-profit's estimate, Sofosbuvir will add $18 billion to overall drug expenses, paid by public payers, in a single year. That money, they argue, could go to treating many other conditions, if Hep C sufferers could get by on the "last gen" (i.e., twice as cheap) Hep C cures. Here's a bit -- but do go read it all, at the Gray Lady:

. . . .The pill, known as Sovaldi, or generically as sofosbuvir, costs $84,000 for a standard 12-week course of treatment. That breaks down to $1,000 for each pill, taken daily. The manufacturer, California-based Gilead Sciences, says private insurers are already covering Sovaldi. The question is whether insurers and public programs like Medicare and Medicaid should have to pay so much for this drug, driving up costs for taxpayers and private policyholders.

Gilead says the price is consistent with the cost of previous treatment regimens (a contention disputed by independent experts) and is reasonable given that the drug can have fewer side effects and cures a higher percentage of patients compared with other drugs. In the long run, the company claims, Sovaldi could save money for insurers by preventing patients from getting sicker and needing costly medical care. . . .

What can or should be done to reduce the cost in the United States? Some experts suggest providing the drug only to patients with advanced liver disease. Others hope that other new drugs in late stages of clinical testing will be approved, adding competition that could help restrain prices. Still others urge that state Medicaid agencies, which cover a big portion of the infected people, negotiate with Gilead for lower prices or find ways to limit the drug’s use when other good options are available. . . .


We are all certain to hear more of this. And if the solution to the cost vs. benefit equasion were obvious, we would have it already. And we do not. It is marked by a complex, nuanced and almost intractable set of competing interests.

Saturday, March 15, 2014

I Don't Have The Internet Resources To Evaluate Her Claim. . .


And so, you will need to read this with the aid of your own set of filters.

UPDATED: Here is the Merck spokeperson's perspective -- at the same article's source code:

". . . .All combined hormonal contraceptives, including NuVaRing and combined oral contraceptives, are associated with an increased risk of [VTE]," said [Merck spokeswoman] Keller. A VTE is a "venous thromboembolic event," which Keller says includes "deep vein thrombosis and pulmonary embolism."

She cited a company study and a U.S. Food & Drug Administration (FDA) study she says "found that the risk of blood clots for new users of NuVaRing is similar to the risk for new users of" combined oral contraceptives.

She also said "all [combined hormonal contraceptives], including NuVaRing, have a Boxed Warning on the increased risk of serious cardiovascular events." She pointed to how "the FDA-approved patient information and the physician package labeling for NuVaRing" have provided such information "since the product was approved in 2001." Keller says updates were made in October 2013 to account for how NuVaRing's new users are at "similar ... risk [of blood clots]" as "new users of combined oral contraceptives."

In a previous e-mail correspondence, Merck spokesperson Keller did tell LifeSiteNews that out of 10,000 women who might take NuVaRing and are not on "combined hormonal contraceptives" (CHC), a year later "1 to 5 of these women will develop a VTE. . . ."

She also told LifeSiteNews that "if 10,000 women who use a CHC" do so in addition to using NuVaRing, "3 to 12 women will develop a VTE." Women at highest risk are those "who are postpartum," meaning 12 weeks past delivery. Of 10,000 women, "40 to 65 will develop a VTE" in one year. . . ..


I'll be back much later tonight; fun road trips beckon me northward.

Friday, March 14, 2014

A Tiny Little GAAP Primer: When A $44 Billion A Year Public Company Ends Up Owning 3% Of A Tiny Company. . .


Well. . . . that, under GAAP, is a divestiture -- from the perspective of Mother Merck.

Overnight, the folks at The Motley Fool (Todd Campbell, at the keyboard) are offering the story that Merck. . . owns a big chunk of Alnylam.

I do understand, from Alnylam's point of view, it is quite beneficial to say Merck is an equity holding believer in RNAi. However, as we made clear in January 2014 -- Merck actually exited this line of research, with the deal. So take this with a grain of salt:
. . . .In exchange for those assets, Merck got $25 million in cash and a more substantial 2.5 million share stake in Alnylam, amounting to a 3% ownership position.

It's unclear whether Merck will sell the shares or hang on to them. Roche received a 10% equity stake in Arrowhead in their deal, but based on SEC filings appears to have worked out of the stake in 2012.

If Merck does hold onto those shares, it will join Sanofi as a deep-pocketed big pharma partner in Alnylam. . . .


My observation would be that Merck isn't very likely to immediately sell the shares (as they are a mere rounding error to Merck) -- but that doesn't make it a "partner" in any real sense -- at 3 per cent equity stake, either. Watch next -- for a similar GlycoFi deal. Word.

Thursday, March 13, 2014

Will Whitehouse Station -- Once Vacated -- Have To Be Completely Repurposed -- Via A Gut Job?


[Editor's Note: corrections throughout, as suggessted by my many cogent anonymous commenters, below. With gratitude!] We have been following the mostly down- (but now up- again) fortunes of the former Schering-Plough HQ at Kenilworth since mid 2009. That puzzle palace was the vessel of a monument to CEO Fred Hassan's vanity. Gaudy even by excessive early 2000s sensibilities, that property was never likely to find a buyer in this post-halcyon days market for New Jersey based branded pharma-manufacturers. So I suppose it should not have been surprising when -- after initially selecting the legacy Ciba-Geigy Organon USA facility at Summit as Merck's new HQ -- Mr. Frazier recently switched horses and selected Kenilworth.

At least he knows he has a reasonable shot of repurposing and selling most of Summit off; the same cannot be said of Kenilworth.

Even so, as we last mentioned just after New Years 2014, Merck will have some significant trouble marketing the Readington/Whitehouse Station facility it is vacating shortly. It is just too big, too specialized and frankly, outdated for today's nimble, small, cost and environmental foot-print savvy (tech-driven) Millennials-led businesses to want to occupy -- even as start up space. Today -- by way of confirmation of that fact, we read of a series of local government town-halls around Whitehouse Station, where it is openly being asked whether the facility needs to be abandoned; stripped clean, and restarted nearly from scratch, in order to get large chunks of it back on the paying tax rolls.

See this, from NJ.com:

. . . .And the Readington session will focus on the “Future of our Corporate Campuses.” With Merck & Co. leaving its world headquarters here by next year, the huge building just north of Route 22 will be vacant. Real estate experts have talked about how difficult it will be to fill the 900,000 square-foot main building as well as others later constructed. Merck originally said it was moving headquarters to Summit, but then last year decided to be based in Kenilworth.

While it would be great to find one company to take over the entire building, the questions include “but is that a reasonable expectation, what else can we look at?” Dziamara noted.

“How to repurpose those sites” is among the items to be discussed in Readington, she said. . . .

[And, Ed. Note: from the link to the "town-halls":]

"[Millennials] are a tech-savvy generation wanting to live in higher-density activity environments, and they do not find one-dimensional office campuses particularly attractive." So said James Hughes, dean of the Bloustein School of Planning and Public Policy at Rutgers University, during his presentation at a July 12 conference on Reinventing New Jersey’s Obsolete Suburban Office Campus. . . .


We will keep an eye on this -- but (if he had so studied, I guess) Mr. Hassan might have learned that "pride," the good book says "goeth before the fall. . . ." He simply over-promised and then under-delivered overbuilt.