tag:blogger.com,1999:blog-4241416962008169508.post1892080681858646374..comments2024-03-29T10:23:47.050-04:00Comments on Just A Life Sciences Blog...: It is usually unwise to complain about the FDA, for the record, in your company's name, in the Wall Street JournalUnknownnoreply@blogger.comBlogger5125tag:blogger.com,1999:blog-4241416962008169508.post-63613154868014896812008-07-06T21:18:00.000-04:002008-07-06T21:18:00.000-04:00I wanted to get back to the question on Schering's...I wanted to get back to the question on Schering's preferred -- and tomorrow, or the next day, I'll likely put up a whole separate post on it, as this is a fairly wide-spread source of befuddlement:<BR/><BR/>Anon. asked "<I>My understanding is that the price is expensive but contains a guaranteed rate of return. Is this all on the up and up?Many at the top own this preferred and are cleaning up at the rests' expense. NO?</I>"<BR/><BR/>In a word -- No.<BR/><BR/>I'd not buy the preferred. It is a suckers' bet. And here's why:<BR/><BR/>The preferred -- trading now at around $190 a share -- will automatically covert into a variable number [bracketed by buckets] of shares of Schering common stock in August 2010 (at an implied price of no less than $27.50 per common Schering share). That single fact is why the preferred trades a fair amount like Schering equity (common), and not so much like debt. <BR/><BR/>Now, if Schering's common is below $27.50, in August 2010, then Schering's issuance of the shares will be dilutive -- Schering will have to pay out $27.50 worth of value when the market is pricing the stock below that. That's a bad thing, for Schering, and a good thing for the preferred holder. <BR/><BR/>Between the Schering common prices of $27.50 and $33.69, in August 2010, it will be a straight exchange/convert. (That's a generally-neutral thing.) <BR/><BR/>If Schering common shares are above $33.69 in August 2010, the issuance will be non-dilutive to common-holders. And that would be a good thing, to Schering, all other things being equal, and a bad thing (absent some special tax situation, unique to a given holder) to the preferred holder.<BR/><BR/>By my most-recent calculations, the preferred needs to be trading below $147 right now, with Schering common where it is (around $19.40) -- to make the preferred a "good deal".<BR/><BR/>I'll explain more fully in a future post.<BR/><BR/>NamasteAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4241416962008169508.post-83179889907311395822008-07-02T08:24:00.000-04:002008-07-02T08:24:00.000-04:00Condor,Of course you are right that Fred had to ha...Condor,<BR/><BR/>Of course you are right that Fred had to have something.<BR/><BR/>What I wonder is considering the information that is out there why couldn't Fred cut a better deal.<BR/><BR/>Organon has been beating the same group of molecules to death since the mid-1960's at least. That's right 60's and maybe even longer, clozapine (asen-apine, olanz-apine) was discovered in 1957.<BR/><BR/>It looks to me like AzkoNobel was trying to salvage something off a big long term investment that apparently wasn't paying off very well.<BR/><BR/>So why did Fred pay top dollar? Pfizer's interest I understand, (more to come later if Congress ever looks into this).<BR/><BR/>SalmonAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4241416962008169508.post-28076732952230324772008-07-02T01:51:00.000-04:002008-07-02T01:51:00.000-04:00Do examine the dividend per share that has been an...Do examine the dividend per share that has been announced for owners of Schering common stock - $.06 and contrast it with the preferred dividend of - +-$3.75. <BR/><BR/>Am I wrong or should I run right out and buy some Schering common so I can get my $.06, while the few can get their $3.75? The preferred likely meets legal requirements for advertising but who really knows about it except the top execs? My understanding is that the price is expensive but contains a guaranteed rate of return. Is this all on the up and up?Many at the top own this preferred and are cleaning up at the rests' expense. NO?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4241416962008169508.post-68520592946816997742008-06-30T12:58:00.000-04:002008-06-30T12:58:00.000-04:00Or, Salmon, CEO Hassan already knew -- as Melissa ...Or, Salmon, CEO Hassan <B><I>already knew</I></B> -- as Melissa Davis, of <A HREF="http://www.thestreet.com/story/10411338/2/scherings-buy-of-organon-had-to-happen.html?partner=healthcare" REL="nofollow">The Street, has openly argued in her column</A> -- that ENHANCE was going to be a bust, and Schering. simply. had. to. have. a. new. deal.<BR/><BR/>So it was Organon -- even though most would have (<B>did!</B>) take a pass on it, after seeing the diligence files. . . . Schering and Hassan pressed on -- paying top-dollar for it (circa $15 billion!).<BR/><BR/>He knew he'd need a new "<I>shiny object</I>" to point to, when the truth of ENHANCE came out.<BR/><BR/>Or so <A HREF="http://www.thestreet.com/story/10411338/2/scherings-buy-of-organon-had-to-happen.html?partner=healthcare" REL="nofollow">Melissa Davis has argued</A>.<BR/><BR/>As ever, thanks for your cogent commentary!<BR/><BR/>Do stop back!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4241416962008169508.post-64749192438543688682008-06-30T11:32:00.000-04:002008-06-30T11:32:00.000-04:00Fred doesn't know what it takes to get a drug appr...Fred doesn't know what it takes to get a drug approved?<BR/><BR/>The law is clear. It has to be Safe and Effective.<BR/><BR/>Now this is relative as all prescription drugs are inherently unsafe, that's why you need a prescription.<BR/><BR/>Now contrary to what some ex-Wyeth CEO Fred Esser has implied that a drug has to be as good as current treatments that is not so. It's what is the overall risk benefit of a drug when viewed in totality. In fact that's what Pharma itself very effectively argued to get accelerated approvals and phase IV commitments through Congress.<BR/><BR/>Fred seems to be implying that when it works the otherway he doesn't like it.<BR/><BR/>With regards to the Organon due diligence I took a look at Scherings Board. Why do they only have two genecists on the board and no one with any drug development experience. You don't see that with Glaxo's board.<BR/><BR/>Even so didn't any of these exceptionally successful business people ask why is AzkoNobel selling off Organon after they were going to take it public and keep the 70% for themselves, plus this is right after Pfizer backed out of their joint venture.<BR/><BR/>Maybe Fred thought he had a guaranteed fix in at the FDA?<BR/><BR/>SalmonAnonymousnoreply@blogger.com