With Sen Wyden Asking After The $2.1 Trillion In Parked Overseas Earnings — I’ll Mention Colorado Idea Again

April 9, 2014 - Leave a Response

Yes, you read that right — over $2 trillion. With a “T”. So that is $2,100 billions, or $2,100,000 millions. . . .

Overnight, several news outlets indicated that Congress is once again considering action on the staggeringly massive cache of untaxed (from a US tax perspective) foreign earnings of US companies, for the moment “permanently” parked overseas.

Of course, the reality is that nothing will happen in an election year, and the corollary reality is that any move to tax those amounts would have to be coupled to an overall reform of the US tax code (to avoid some obvious macro-economic damaging of our still nascent US recovery). [For reference, my May 2013 backgrounders are here, and here -- on the whole topic more generally.]

An overall tax code overhaul last happened in 1986, under Reagan. So — don’t hold your breath, here. However, with Merck among the top six or so US companies with such parked cash, I thought I’d remind readers of the relatively sound (and therefor likely unpassable!) idea out of the Senator from Colorado. I mentioned it last in early March.

The idea is that GE, Merck, Google, Microsoft and Apple and Abbott will buy (actually, Dutch-auction bid upon) US infrastucture bonds — and thus commit essentially to the rebuilding of roads, bridges and schools, nation-wide – and in so doing — be granted a “tax holiday,” for a like (or slighly lesser) amount of the permanently-foreign cash earnings, sitting anywhere in the EU, Japan, Northern Ireland, or the Caymans — depending on the company. So. . . Merck could bring home all the ex-US cash it wanted, tax free, if it put it all to work, here in the US — on rebuilding infrastucture, via a federal bond progam. In about 10 years’ time, when Merck has collected the interest on the bonds it bought — the principal would be repaid by the US Treasury, and be repatriated earnings free of tax. Just a time lag — that’s all. And the whole program is dyed deeply-blue in patriotism. I love it.

And, like I say — small chance of passage. And certainly not this election cycle. Finally, for those of us who have done a lot of this sort of structuring, there is always a tax-advantaged way (or two!) to bring the cash home. I’d expect Merck to do so — maybe as early as 2015 — for at least a part of the parked earnings. Here endeth the prognostication(s).

“Told Ya’ So” Department: Consumer Health — Latest Rumors

April 9, 2014 - Leave a Response

This is only a tiny update, actually. I’ll simply note that the latest rumors being reported by Reuters UK have it that the likely front runner on the Consumer Health deal is Reckitt — a UK firm. I said such a firm could afford to pay more for the assets. And they likely will. Moreover, Reckitt faces a lower antitrust bar than many of its potential co-bidders.

The other incremental journo-reported rumor update is that a final decision may be made by Merck as of April 16. Lord only knows when — even if that is accurate — the world at large would be told of the outcome. I still see a spin- or split- as a real possibility.

Housekeeping note: may be spotty coverage here today — kinda busy off-grid, traveling, etc. . . .

Tough Talk, On Price, From Walgreens’ Partner, Express Scripts. . .

April 8, 2014 - Leave a Response

I am off-grid, at a seminar this early morning — so chew on this until I return — Express Scripts is firing shots across the bow of big pharma — this is new, indeed.

Per the Wall Street Journal’s health care blog, then:

. . . .“Never before has a drug been priced this high to treat a patient population this large, and the resulting costs will be unsustainable for our country,” warns Express Scripts chief medical officer Steve Miller, in a statement. “The burden will fall upon individual patients, state and federal governments, and payers, who will have to balance access and affordability in way they never have had to before. . . .”

As Dr. Miller sees it, though, Sovaldi is actually part of a larger trend in recent years in which so-called specialty medicines, a category that often includes biologic medicines that are injected or infused, are priced at ever-higher levels that are not sustainable. “The current pricing mentality around innovative products,” he cautions, “is unprecedented and unreasonable. . . .”

Merck is called out by name in the article as well. Do go read it. This is solid encouragement of US price competition — spurred by the ACA of 2010′s rolling implementation, in action. And that is a good thing — for the system, overall. Be excellent to one another.

Merck Affiliate Is In — At Next Round Of Funding — For Daktari, In The Boston-Area

April 7, 2014 - Leave a Response

In the past year, Daktari’s amended SEC Form D discloses that it has raised just under $20 million — from 27 different investors (not just the $13 million mentioned in the below article), in a still-ongoing private placement. Backgrounder here.

We do think we know that in early 2012, Merck affiliated entities kicked in the vast bulk of $10 million — and we are told that Merck has come in for some part of this latest round. Here is the local press report, of this afternoon:

. . . .Bill Rodriguez, co-founder and CEO of the 55-employee company, said in an interview that the money will go to commercialize the company’s CD4 system, which is used to monitor white blood cell count in patients diagnosed with HIV. . . .

He said the company, which is housed in the building that formerly was home to Wyeth Pharmaceuticals in Porter Square, has grown significantly from just 25 employees a year ago to support the launch of the first product. Most of the 55 employees work in Cambridge. Tests for other diseases, such as malaria and tuberculosis, are in the works, he said. . .

In February, Daktari was one of several local companies to receive a tax incentive award from the Massachusetts Life Sciences Center. The $347,000 in tax breaks from the MLSC is contingent on the company adding 17 new jobs in the next year. . . .

The $13 million was disclosed in a filing with the Securities an Exchange Commission. It represents the closing of the company’s C round of funding, said Rodriguez, and lead investors were Merck’s Global Healthcare Innovation fund, Norwich Ventures and the Partners Innovation Fund. . . .

Just for those of you keeping score at home — this is an HIV diagnostic play — for the future, and primarily in the still-developing world.

Just A Little More Data — Out Of AACR, In San Diego — On Merck’s Pembrolizumab (MK-3475)

April 7, 2014 - Leave a Response

I might be tempted to rather snarkily suggest that the San Diego press release — on a Sunday afternoon — was (in part intended as) an “innoculation” against (and to counteract) the Sunday front page NYT story — listing a $133,000 price, for one dose of Merck’s Remicade®, here in some for-profit outpatient infusion clinics. But I would also note that the conference in San Diego has breaking news on several other oncology candidates, too. So, worthy of reading those abstracts, too.

In any event, here it is, out of a general purpose MIT online tech journal — do go read it all, but a bit follows:

. . . .Merck’s compound is an antibody, a Y-shaped biological molecule that grabs onto a specific protein. The target protein normally prevents immune cells from attacking cancer. By blocking the activity of that protein, the antibody frees the immune cell to fight the disease. Roche, GlaxoSmithKline, Bristol-Myers Squibb, and others are also developing antibodies to release such brakes on the immune system. . . .

The immune system can be a powerful ally for doctors, but they must tread carefully. “We know the immune system is capable of killing any cell. If we aren’t careful, we could trigger systemic autoimmune disease of major consequences,” says [Merck's Roger] Perlmutter. . . .

So far, the treatments have been tested on only a subset of cancer types — mostly melanoma but also lung cancers and breast cancers, among others. Researchers will have to test the treatments on more cancer types to know how wide a range of malignancies they can attack, and whether certain targets, or even combination of targets, are needed. “It may be that in different tumor types, different immune modulators will have different importance,” says Deborah Law, who heads one of Merck’s biologics research units. “Combination approaches might be most effective,” she says. . . .

I’ll remind the readership that BMS’s Nivolumab is the very-likely leader, here. It should come as no surprise that at least under Dr. Perlmutter, Merck has suddenly become much more “chatty” — about its in-process programs — than it had ever been in the past. In contrast, meanwhile, BMS continues to adhere to that “old school” more taciturn approach — on its clinical trial programs.

That means we saw no news on nivolumab, at the San Diego confab — but that doesn’t mean anything other than that BMS is keeping its powder dry, for June 2014. . . . And so, now we wait for June — and Chicago’s ASCO.

An Excellent Bit Of Commentary — On Some Of The Many Remaining “Cost Anomalies” In US Health Care Delivery

April 6, 2014 - Leave a Response

Once in a while, a commenter drops by — largely out of the blue — to offer such an excellent set of perspectives, that the same merits a new post.

The below is plainly one of those. [I even made a custom graphic at right, for the occassion, while I watched an on demand replay of the Kentucky-Wisconsin thriller!] And so, without any additional ado — here is an anoymous take on my cost of drugs story (a la Remicade), of this very morning:

. . . .Anonymous said. . .

About a year ago (nearly to the week) Time devoted an entire issue to the high cost of US Healthcare.

Here is a Forbes article comparing profit margins of hospitals to other industries, making it look not SO bad; but, there is no breakout between for profit and not-for-profit institutions.

I worked for a spell at a not-for-profit insurance carrier. Ironically I was making my exit just as this Time piece came out. At this particular firm, the largest provider in my, and many other, states, you’d be amazed at the perks, salaries and job titles going around. And, yes, the Medical Loss Ratio (MLR) from the ACA definitely has affected business by way of subscriber refunds each year it has been in effect. However, the popular thinking in this particular place is to keep the VPs and above (woo, you should see those salaries and bennies) — while demoting directors (where those platinum bennies start) — and thinning out the lower ranks.

The amount of money these plans hold in reserves is often dozens of times higher than what their state boards of insurance require. Some argue this is just a way for these insurance companies to keep raking in premiums at higher than necessary costs, even under the ACA. There are also many class action lawsuits against these federated insurance plans who are often the only game in town because of their ‘local’ presence.

Sorry to drone on here but there are pah-lenty of places to streamline and economize in the chain of healthcare.

April 6, 2014 at 7:55 PM. . . .

Absolutely agree — spot on! Thank you so much, Anon. — do stop back by — and please feel free to share any time, one and all!

The POTUS BHO 44 Out-Pointed Me — On The ‘Gators Loss: Bracketology Concluded

April 6, 2014 - Leave a Response

Well. . . he beat me by 16 points. Neither of us have a team still in contention. So it goes. . . .

I’ll take Kentucky to win it all, now.

Great tourney! That’s a wrap!

NYT’s “Exhibit A” Piece — On Why All US Govt. Payers MUST Be Allowed To Negotiate For Better Drug Pricing

April 6, 2014 - Leave a Response

The New York Times has a very very cogent, and very long article — on the front page, center — this Sunday morning, on “cost” of chronic diseases in the US. And the bulk of the article is about the cost of Medtronic’s Type I diabetes pump solution (not Merck’s sitagliptin injection for Type II). [And, to be sure, "cost" may be too gentle a word here -- "profiteering" might be more apt -- go read it all.]

The article does a comprehensive job of explaining “what all is broken” (and that is still, post the ACA of 2010, a very long list of things) with the “profiteering” underway in chronic diseases — here in the US, as compared to the United Kingdom, or the EU — primarily how the sky-high “costs” of the same are only partially covered in the US system.

Moreover, to reinforce the point that this is not an abberation related only to Medtronic’s pump set — the article makes specific note of the Remicade®/Simponi® product line — to which Merck still holds the US selling rights, post the arbitration settlement, out of the Schering-Plough bust-up faux pas (not that one — no, the choosing of the wrong structure to avoid triggering a $500 million in an upfront arbitration settlement).

It also mentions the cost of Crohn’s disease management — which is a legacy Schering Plough program (but doesn’t mention the name of that treatment). Do go read it all — but here is a bit:

. . . .For Kristen Bailey, 28, of Colorado Springs, who has Crohn’s disease, an intestinal disorder, that meant not marrying her fiancée so she could continue to qualify for drug company assistance programs that provide, at no cost, two medicines with list prices of more than $16,000 a year in the United States. . . .

For Jeffrey Kivi, 51, a chemistry teacher at Stuyvesant High School in New York, it meant recently giving up an intravenous drug that, as an outpatient, he had had infused every six weeks for years to keep his psoriatic arthritis at bay. Before taking that drug, [Merck's US distributed] Remicade, Dr. Kivi was on high doses of steroids for debilitating joint pain that left him unable to walk at times.

But when his last three-hour infusion at NYU Langone Medical Center’s outpatient clinic generated a bill of $133,000 — and his insurer paid $99,593 — Dr. Kivi was so outraged that he decided to risk switching to another drug that he could inject by himself at home. That is true even though his insurer did not require him to make up the difference.

“I cannot, in good conscience, continue to force my insurance company to pay $100,000 to NYU each time I get a Remicade infusion,” Dr. Kivi, who was a drug company researcher for many years, wrote to the hospital. “That’s insane. . . .”

A good portion of that astronomical Remicade infusion cost above was driven by the place — the specific out-patient for profit clinic affiliated with a teaching hospital system — at which the patient in question received the Remicade injections — and even so, I think we all recognize that one hospital is not 100 times better than another, in the US. Not for simple infusions. Maybe twice as good — but not 100 times better. . . yet that was the treatment cost differential — one-hundred fold. Astonishing. And in need of some rather aggressive additional reform, in my mind. Buckle up, Merck adn J&J — and all you for profit hospital chains.

Bruce Kuhlik Realizes About $2.4 Million — Via Automated Plan’s Cashless Exercises Of His Options: No Real Tea Leaves There

April 5, 2014 - Leave a Response

Message One: Don’t be alarmed, all you Merck longs. Why? Well, because Mr. Kuhlik had no discretion, in the moment, as to these trades (see Footnote 1 to the SEC Form 4 linked there). So, very little may be inferred from them. [But permit me to blather on for a moment here -- speculating about it, anyway! Net, net -- the executive simply added, and subtracted an equal number of shares -- thus he returned to the level of stock ownership he last had at February 2014, post these transactions. So he is standing pat.]

What we do know is that the EVP and General Counsel of Merck had previously adopted an algorithm (or set of instructions) — in writing — and left them with his broker or financial advisor. [See Sullivan & Cromwell's SEC rule 10b5-1 letter of comments, on such trading plans.] We also know that whatever those pre-authorized plans provided, as to Merck stock options, yesterday all the pre-approved wires were tripped. That is, at some level, at some time in the past, Mr. Kuhlik had determined that $56.50 would be fully valued — as a Merck common stock NYSE selling price.

And so, three large traunches of his previously-vested stock options were liquidated yesterday. Understand that the benefit of a 10b5-1 trading plan is that an executive may acheive a sale, even while in possession of material non-public information.

And that is why very little may be inferred from his plan sale. As of the close of Q1 2014, Mr. Kuhlik likely had inside information about the level of interest, and likely prices, for the Consumer Health businesses. He now very likely knows what Merck executive management (in consort with its bankers) will recommend to the board — on the topic. Yet — because he set up these trading rules long ago, while not in possession of that information — the plan sells, and he has a safe harbor from insider trading liability — for the trades, at the SEC. Clever. And fair.

Said another way, it is quite possible, that — based on what he NOW knows – $56.50 is far too low a price.

We won’t ever know. He could also think $56.50 unduly rich, based on today’s inside information. So don’t infer too much, at all — from his trades.

However, if my wild (spinco) guess proves right — that the bids are on the low side, and a spinoff might occur as to Consumer Health assets. . . then maxing out the exercise of stock options — as his plan did yesterday — is very smart. Stock options (that haven’t been exercised) are not entitled to receive shares of the newco — unless, of course, the Merck participant exercises the options and accepts full-voting common stock in return. That’s what he did yesterday. [If one is holding options of Merck, and ends up as an employee of the as-yet mythical new Consumer Health spinco, one would receive an equitable adjustment on those Merck options -- converting them into newco ones. Not so, if one is staying with mother Merck -- as I am certain the GC would be most likely to do. The Merck employees will see a decrease in exercise price, and an slight increase in the number of Merck shares under option -- but will not be entitled to spinco shares, absent exercise of the underlying options.]

So — that is about all we know — or can guess at — related to this $2.4 million sale. It is also possible that Mr. Kuhlik is buying some sweet weekend real estate — somewhere on the southeastern seaboard — and just paid it off. We. just. don’t. know. Be excellent to one another!

Reuters Has An Exclusive Scoop — On Merck’s Zilmax® Reintroduction Snags. . .

April 4, 2014 - Leave a Response

To be fair to that erstwhile news outlet — I’ll just give you a link — and will only reprint an excerpt tomorrow, after the world has digested it. MONDAY 04.07.14 — NOON UPDATE: Here’s a bit of the copy, FYI:

. . . .Merck plans to conduct the biggest ever test of its kind in an effort to reintroduce the weight-adding drug into the United States and Canada after suspending sales last August. A test herd of this size is currently worth up to $500 million.

Feedlot owners, however, are reluctant to participate in the study until they get a guarantee that slaughterhouses will be willing to buy the Zilmax-fed animals.

Snags with the study, whose size was confirmed to Reuters by Merck, have not been previously reported.

“I’d be happy to sign up, just as soon as Merck tells me who is going to pay me after they’re done,” said a feedlot owner in Texas. “It’s been a horrible time, with the drought. I can’t afford to give away a steer, let alone hundreds. . . .”

I wouldn’t bet on a 2014 reintroduction, now in the US, at least.

Be excellent to one another — have a great weekend!


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