Lawsuit Tug O’ War: Fight Escalates — Over Potential Lost Tax Revenue — From Legacy Schering-Plough Site In Union, NJ

July 13, 2014 - Leave a Response

At the end of May 2014, we detailed a burgeoning legal spat, over the legacy Schering-Plough facility in Union, New Jersey, on Morris Avenue (see at right). Merck has vacated the place, and Kean University wants to get its hands on it. But that would take it off the real estate tax rolls.

Prior to the Kean University interest, it is claimed that Merck had agreed in principle to sell it to Russo Investments — an entity that would keep it on the taxable, and tax-paying, parcel lists, in Union. Then enters (stage right), an heir to the vast Kean fortune, in New Jersey. It seems that running with the land was a covenant that should it be sold, the Keans had a right of first refusal — via a trust which (it is claimed, again) expired in the 1990s. Even so, the Kean heirs have indicated their desire to exercise this right, and then sell on to Kean University. The property would nicely complement the existing Kean U. campus space — as it is dead across the street from the main campus. Thus the escalation in rhetoric, and blue-backed legal pleadings. Smile.

From NJ.com, we learn that Union township’s mayor is pretty surprised — and disappointed — that a court is essentially allowing the sale to the University — contingent only on a final court order that the same is proper (i.e., that the covenant still runs with the land, through the trust — to the Kean heirs at law).

And so — it does not look particularly good for all the other residents of Union, who rely on those tax revenues, for public school funding, snow plowing and garbage pickup. Here’s the bit — and do go read it all (as a story of more legacy Schering-Plough rust-creation, on the old iron shelves of the nation’s medicine cabinet):

. . . .However, on June 30, Judge Katherine Dupuis granted the university’s request to pursue the sale, and enter a purchase contract. The university, however, cannot not close on the property pending the outcome of the lawsuit.

“To our surprise it seems that they are moving forward,” township [Union, NJ] Mayor Clifton People said. “They can do everything except complete the actual sale. . . .”

He estimated that the township would lose $4 million in property taxes annually if the university takes the property. Public institutions, such as universities, do not pay property taxes. . . .

Much could yet change — as the lawsuits wind their way through the byzantine New Jersey state court system — so we will keep you posted. [Go out and have a Sunday-style adventure! Ice cream on the beach or biking in the leaves. . . I will as well.] And, do go see the new posthumous Roger Ebert documentary (in limited release this weekened) — very good stuff, for all movie fans — and fans of a vastly gentle, but searing, intellect. What he wrote, at age 20 (on the University of Illinois daily paper’s editorial page), about the “4 Little Girls” bombing in Birmingham that year — will resonate with you, to your dying day. I promise.

Federal Fosamax® Femur MDL Update: The Gaynors Take Their Bellwether Trial, On Appeal To The Third Circuit, On SUmmary Dismissal By Judge Pisano

July 12, 2014 - Leave a Response

About ten days ago, we noted that the very competent US District Court Judge Joel Pisano (sitting in Newark) had dismissed the Gaynors’ suit against Merck — saying that there were essentially no claims left (even if proved) — that would entitle the Gaynors to a judgment against Whitehouse Station.

So the jury never got empaneled — to hear, or deliberate — on their case. Now they appeal that ruling. Meanwhile Judge Pisano continues to look for other bellwether cases to help line out the likely settlement posture for the parties — and get a handle on whether the damages (if any are found to be attributable to Merck’s conduct in selling Fosamax®) will warrant any form of a global offer from Merck. We are keeping tabs:

. . . .PLEASE TAKE NOTICE that Barbara Gaynor and Robert Gaynor, plaintiffs in Barbara Gaynor and Robert Gaynor v. Merck Sharp & Dohme Corp., appeals to the United States Court of Appeals for the Third Circuit from each and every part of the Opinion and Order entered on June 17, 2014 [MDL Dkt. Nos. 3855, 3856], and from all prior and subsequent opinions, orders, and rulings adverse to Plaintiff, including without limitation the Letter Order entered on August 13, 2013 [MDL Dkt. No. 2887] and the Order to Show Cause entered on August 15, 2013 [MDL Dkt. No. 2895].

Dated: July 10, 2014. . . .

We will keep you up to the minute — as this appeal progresses, but I see only a small chance that Judge Pisano is overruled here.

Merck’s Indian Affiliate Likely To Settle With Glenmark — Over “Generic” Sitagliptin Phospate Sales In India: Januvia® Chronicles

July 12, 2014 - Leave a Response

MRK-Glenmark-Alt-2014 The wider narrative lines here are fascinating, manifold — and complicated (we have been following this developing story closely, for nearly 18 months, now). And it has important implications — for US policies on intellectual property — as the same affect multinational enterprises in India. There are many facets to the issues more broadly presented, each reflecting a different three or four hues of the rainbow, as the facets of the diamond are rotated in the morning sunlight. So I ask you, dear reader — to bear with me as I likely over-indulge in this metaphor(!).

First, there is the facet that refracts cool blues, to royal purples — the rights (and obligations) of a branded innovator (Merck) seeking to recoup the undoubtedly billions of dollars invested in a proprietary drug development program — even in the poorest, most disease afflicted nations on Earth. Then there are the warm oranges, which stray into angry reds – the health ministers of India (and their bretheren, the local patent examiners), seeking to provide life-saving, but affordable diabetes management medications to all of India — the nation with very nearly the highest “burden of the disease” index — on the planet. There are more than 30 million diabetics in India (likely doubling, by 2030) — and the bulk of those routinely die of the disease, for lack of any affordable care.

In addition, as we rotate the diamond in the sunlight — we see soft pinks, fading into pale, almost translucent golds. . . these are the World Trade Organization, and its Doha Declarations, which purport to allow poorer nations, via TRIPS, to assert an “emminent domain” of sorts, over needed IP for humanitarian, life-saving goals. There is an ongoing global debate, on that topic — which underlies all these Indian IP disputes. Will the nation simply “confiscate” medical IP, in order to save the lives of tens of millions of their citizens? We shall see.

Finally — in a pulsating glow, from the heart of this highly polished carbon crystal — always and forever — is a deep, deep green: money. Not all (and perhaps not even most) of the actors here do so from a charitable point of view: in fact, there is some competent evidence that Glenmark will charge a nearly as exorbidant price for the “generic” it seeks to make — in other nations, around the world, as Merck does. Afterall, in the end, there are literally tens of billions to be won, via slight shifts in regulatory attitudes, and in patent court invalidation proceedings — which, by their terms, might allow Glenmark various export rights. Here, MSD India, Merck’s local affiliate, is awaiting the ruling of a high court in Delhi, which may find that Merck’s patent on sitigliptin does not cover the phosphate polymorph of sitagliptin. Should that ruling be handed down, Glenmark, and all Indian manufacturers, Sun and Lupin included, could sell the “genericized” version — at any price they choose. [Here is some of the much earlier 2013 background, on it all.]

So it is with great interest, that I note that The Times of India is reporting overnight that Merck’s Indian affiliate has agreed to mediate the patent spat on Januvia® in India. It is likely to lead to a settled set of payments — from Glenmark, to Merck — a sort of small commission, on sales of generic sitagliptin phospate polymorphs. Note that the story itself recites the Glenmark’s price is only 30 per cent cheaper than Merck’s — and the WHO estimates that the price of most life saving medicines need to be 99 per cent cheaper than US retail, to be affordable to the vast swath of diabetes sufferers, in India. Here’s a bit — do go read it all:

. . . .In the long-winding patent battle on a widely-prescribed diabetes drug, Januvia (sitagliptin), multinational company Merck (MSD) has sought a settlement to end the dispute with generic company, Glenmark on the blockbuster drug. Last year, US-based Merck’s subsidiary in India dragged Glenmark to court, seeking a stop on the sale of a more affordable version of its diabetes drug, Januvia, joining the list of MNCs engaged in turf wars with generic companies in the country.

The MNC firm had earlier sought an injunction against Glenmark marketing the generic version of its diabetes drug. Glenmark priced its diabetes drug last year around 30% cheaper than Merck’s Januvia, where the savings to patients could be nearly Rs 5000 a year. . . .

Also recall that Merck has agreed with Sun Pharmaceuticals in India — to the effect that the latter shall be allowed to make an “authorized” generic version of Januvia for local in-country markets. I will try to discern whether Merck still intends to help Sun undercut the Glenmark offering in India — as the mediation progresses. But I now think, since Merck itself volunteered to mediate the dispute — Merck had made a calculated assessment that it was likely to lose the patent fight, in the Inidan courts — or win, and seek the India Health Ministry grant a TRIPS “compulsary license” to the drug in India.

I suppose this also signals Mr. Frazier’s disagreement with Pfizer’s chairman — as the latter is the PhRMA chair at the moment as well: Ian favors a “get tough” policy with INdia — while Merck is now clearly being conciliatory. So it goes, over my coffee & banana, on a warm gray Saturday morning.

Live, Growing Smallpox Sample Vials Found In Forgotten US Lab-Storage Bins

July 11, 2014 - Leave a Response

Well — this ought to “shiver our collective timbers“!

While not exclusively applicable as a Merck story (it is a vaccines story certainly, though), the idea that there might be likely lethal, but casually-stored 1950s era live virus vials floating around old labs. . . is deeply unsettling. From CNN online then:

. . . .At least two of the vials employees at the National Institutes of Health found in an unused storage room earlier this month contain viable samples of the deadly smallpox virus, the Centers for Disease Control and Prevention said Friday. Employees found six forgotten vials when they were preparing to move a lab from the Food and Drug Administration’s Bethesda, Maryland, campus to a different location. The laboratory had been used by the NIH but was transferred to the FDA in 1972.

When the scientists found the vials, they immediately put them in a containment lab and on July 1 notified the branch of the government that deals with toxic substances, called the Division of Select Agents and Toxins. . . .

Smallpox, known also by its scientific name as variola, was the deadly virus that was the scourge of civilization for centuries. It’s been considered an eradicated disease since 1980, following successful worldwide vaccination programs. The last known outbreak in the U.S. was in 1947 in New York. . . .

This sort of thing is a scientist’s worst fear: a disease we eradicated almost four decades ago — springing back into the wild — because some samples were forgotten, and not incinerated or irradiated. Good sci fi — very scary Andromeda Strain style reality scenario. Have safe weekends, one and all — and get, or stay. . . healthy!

Merck’s Divestitures Of Consumer Health And Other Businesses to Bayer Clear Hart Scott: Federal Register

July 11, 2014 - Leave a Response

I’ll have more in a few minutes, but Merck was granted early termination of the so-called HSR waiting period here in the US, overnight, just before the long holiday weekend break.

And so this $14.2 billion deal is very likely to close in Q3 2014. From 79 FR 39392 of the Federal Register, reprinted as a feed at Insurance News Net, then:

. . . .Section 7A of the Clayton Act, 15 U.S.C. 18a, as added by Title II of the Hart-Scott-Rodin Antitrust Improvements Act of 1976, requires persons contemplating certain mergers or acquisitions to give the Federal Trade Commission and the Assistant Attorney General advance notice and to wait designated periods before consummation of such plans. Section 7A(b)(2) of the Act permits the agencies, in individual cases, to terminate this waiting period prior to its expiration and requires that notice of this action be published in the Federal Register .

The following transactions were granted early termination–on the dates indicated–of the waiting period provided by law and the premerger notification rules. The listing for each transaction includes the transaction number and the parties to the transaction. . . .

[06.30.2014] 20141051 G Bayer AG; Merck & Co., Inc.; Bayer AG. 20141052 G Merck & Co., Inc.; Bayer AG; Merck & Co., Inc. . . .

Not surprising, given the lack of US overlap in the involved businesses — between each of Bayer AG and Whitehouse Station. Now the European Competition Commission is on deck — to clear the deal — do stay tuned. And have a glorious sun-drenched Friday!

For Second Time In 30 Days, Chairman & CEO Lightens Holdings Slightly, Via Pre-Arranged Plan Sales

July 10, 2014 - Leave a Response

At the end of the day yesterday, Mr. Frazier disclosed another near 10,000 share sale, bringing his total sales to close to 20,000 shares since June 10, 2014. Each of these were via cashless exercises of options, in each case options granted and vested many years ago — they were relatively close to expiry date, in any event.

As we said then, however, since these are simply pre-set trading plan sales — they do not reflect a view of any kind — about Merck’s current operations or prospects. As with all high executives at Merck, he is now likely over-invested (from a diversification standpoint) in Merck — it is his career as well as his single largest investment (by asset class), in all likelihood. So this small diversification should not concern the market. Afterall, Mr. Frazier still owns over 341,000 Merck common shares outright (and holds the right to acquire several hundred thousand more, via options) — after these transactions.

In fact, after the cashless exercises of a day or so ago (and the related partial sales) — his net position has increased slightly — by about 3,000 shares since June 10, 2014. He’s up — not down — in total beneficial ownership of Merck stock. Trust that.

Longer Term (8 to 12 Months Out), ISI Group’s Schoenebaum (Like Almost All On Wall Street) Expects Opdivo® (Nivolumab) To Best Merck’s Pembrolizumab In US And Be Oncology Front Line “Standard Of Care”

July 10, 2014 - Leave a Response

So — while the potential October 28 date at FDA for Merck’s immuno-Anti-PD-1 candidate remains in place (and likely ahead of BMS’s timeline in the US — for melanoma), BMS is swiftly pivoting toward approvals in the US for lung cancer — the bigger market opportunity, by far – and is very likely to garner the first US FDA approval, for that mammoth indication. To speak more plainly, that will render Merck’s candidate quite clearly. . . a second-class citizen, in the most important market, I’m afraid.

This bears much more close watching — but it seems the horse race is now BMS’s to lose. It has the most important lead, here. From Investors’ Business Daily, then:

. . . .Nivolumab, now branded Opdivo, is Bristol’s lead drug in the much-anticipated anti-PD-1 class of cancer fighters and has achieved outstanding results in clinical trials against melanoma when combined with Bristol’s already-launched drug Yervoy. . . .

[ISI's Mark] Schoenebaum added that the combo will probably become the standard of care and overtake Merck’s anti-PD-1 pembrolizumab, which is in process for a melanoma approval perhaps eight months ahead of Opdivo’s. Opdivo is also already on the FDA’s agenda as a treatment for squamous-cell lung cancer and was approved for melanoma three days ago in Japan. . . .

So — if Merck reaches US FDA approval in melanoma first (though as of this morning, there isn’t even an Advisory Committee date on the FDA’s official calendar — for immuno-oncology candidates) — it will likely only be by a few months, as I’ve long held. The bulk of this perhaps $35 billion market opportunity will go to BMS. Just my guess. Do stay tuned.

Dutch Court: Mylan To Pay Merck Damages — For Sales In EU Of Generic Version Of Propecia®?

July 9, 2014 - Leave a Response

This patent litigation has raged hot and cold — including some country by country settlements — since early 2012. In October of this year, the central patent expires on finasteride. [Two of my many older backgrounders -- more generally, on the Merck hair loss drug's travails, here; and here.]

So — Mylan may well end up (at some distant future date) paying infringement royalties to Merck for the 2012 to date sales, at least in the Netherlands. I am sure Mylan will appeal. If it does, it will have to post a bond for at least a portion of the awarded damages. So I expect settlement talks are underway, now. Here is the item — and a bit (do go read it all):

. . . .[The patent] has been the subject of legal proceedings in various countries, with different outcomes:

▲ In the United Kingdom, the Court of Appeal held the patent to be valid.

▲ The German Federal Patent Court invalidated the patent for lack of novelty. On appeal, MSD and Mylan settled the case.

▲ In France, EP 724.444 B1 was held invalid by the first-instance court; the case is now on appeal.

▲ The Spanish first-instance court and the court of appeal invalidated EP 724.444 B1 for lack of inventive step.

▲ In Italy, EP 724.444 B1 was held valid at first instance, and MSD and Mylan settled on appeal. . . .

Do stay tuned. . . we will too. Have an excellent birthday – if today is your special day!

Merck’s Chief HR Officer Nets Over $5 Million In Open Market Sale — Cashless Option Exercise On Monday

July 8, 2014 - Leave a Response

Again (as was true with Mr. Deese last week), this HR EVP’s sale was all dictated by a so called 10b5-1 trading plan, so this doesn’t say much about the executive’s view on Merck’s fortunes or operations.

It just says that she has diversified her holdings — to the tune of $5.2 million. She still has over $5.5 million in Merck equity of various sorts. So, she is still keenly focused, I’d argue.

This automated robo-press-writing algorithm quotes a gross figure, not the net proceeds (and even then, the $5 million is pre-tax):

. . . .Mirian M. Graddick Weir sold 180,047 shares of the company’s stock on the open market in a transaction that occurred on Monday, July 7th. The stock was sold at an average price of $59.16, for a total value of $10,651,580.52. Following the transaction, the insider now directly owns 93,564 shares in the company, valued at approximately $5,535,246. . . .

Nice work — if you can get it.

Leerink Swann Had Merck At $57 Since February 2014 — Now. . . Target Is $60 (But CIti Targets Merck At $57)

July 8, 2014 - Leave a Response

Well, I think the overall message here — as a consensus — is that Merck is pretty nearly “fully valued”.

As the headline indicates, Seamus Fernandez’s firm has a new 12 month target of $60 on Whitehouse Station’s common stock. That’s up only five per cent from the last target — and only a percent or two above today’s NYSE opening price. Significantly, Citi has a 12 month target below today’s price — at $57, though that too was an increase, for Citi.

Last week, during the holiday lull, Barclays (the optimist of the bunch, at the moment!) set $61 as its new 12 month target. [Recall that Barclays inherited the Lehman Bros. analysts -- when the latter firm imploded in 2008.] Still not very much over the current NYSE MRK trading ranges. So it goes.

[BTW, I love that Matt Herper was able to pin Merck down -- on the record -- on the Italian Zetia MD ham-handing. Sometimes, at least, the little guys get. . . heard.]

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