The Latest — From Federal Propecia® MDL In Brooklyn: Last Thursday’s Status Conference — Outcomes; Smallish Scheduling Changes

February 8, 2016 - Leave a Response

The very-able Judge Brian L. Cogan has now been officially named — to replace the retiring Judge Gleeson (as of this morning’s electronic PACER docket entries), and so we may infer that as to the second to last paragraph quoted in blue ital. below, from Thursday’s status conference minute order, that Judge Cogan will continue to rely on Magistrate Kuo’s pre-trial management procedures [i.e., no re-work there — good news.]

We may also infer that both sides wish to move swiftly to bell-wether case selection (thus the list of 50 names by February 22, 2016 — and fact sheets for all 50 from Merck by May 6, 2016). The earlier dates were February 1, 2016 and April 15, respectively, just for your information. Even so, Merck’s deadline — for the five cases it would like to try (as bellwethers) remained the same — May 27, 2016. So I think it fair to say that overall — the litigation is heating up. Here’s the minute entry, in full:

. . . .Minute Entry for proceedings held before Magistrate Judge Peggy Kuo.

Status Conference held on 2/4/2016. Attorneys Trent B. Miracle, and Timothy J. Becker appeared on behalf of plaintiffs. Attorneys Charles Morrow, Ben Scott, and Matthew T. McLaughlin appeared on behalf of defendant Merck & Co. Attorney Mili Makhijan appeared for defendant Medical Hair Restoration.

The parties agreed and the Court approved the following changes to the Discovery and Trial Plan Practice and Procedure Order No. 10, dated September 29, 2016, Document No.: [274]

At Page 3, Item No. 6: “Defense Fact Sheets. On or before February 22, 2016, Plaintiffs will provide Merck with a list of fifty (50) Plaintiffs. Merck must serve on Plaintiffs substantially complete Defense Fact Sheets for these fifty (50) cases by May 6, 2016. Merck must also serve on Plaintiffs substantially complete Defense Fact Sheets for the five (5) cases selected by Merck for the Case Pool no later than May 27, 2016.” (changes in bold).

The parties state that they anticipate agreeing on further amendments to the scheduling of deadlines in that PPO and that they would submit those proposed amendments to the Court in “Track Changes” mode for the Court’s approval.

With regard to the suggested judicial reassignment of the case to District Judge Cogan, the parties expressed a desire to know whether the District Judge would continue to rely on the Magistrate Judge’s pre-trial management of the case. The parties stated their belief that the case is now moving from a phase focused on mechanics to a more substantive phase.

The next status conference is scheduled for March 16, 2016 at 1:00 pm, in Courtroom 322 North, before Magistrate Judge Peggy Kuo. . . .

We will of course keep you apprised. Now enjoy the bits of fluffy white stuff on your walk this afternoon!

A New Mini-Spot — For Collecting That KaloBios Bankruptcy Analysis Goodness

February 8, 2016 - Leave a Response

I earlier wrote that I think it highly unlikely that any of Mr. Shkreli’s equity interest in KaloBios will survive the bankruptcy. That is, he will almost certainly no longer hold even a small bit of the stock, as KaloBios exits bankruptcy protection some 15 to 20 months from now.

Because some parts of that discussion may not properly fit under even the broader New Merck Reviewed meta-narrative and mission, here — I will open a mini-site, dedicated to the KaloBios bankruptcy matters. I will continue to populate it with tidbits, in the coming week or so (travel schedule permitting). Some of the historical material from this site will appear there, but from time to time, pieces that do not appear here — will be placed there. Smile.

Now you know. Onward — as snow drifts aimlessly past my window, this morning!

Minor MSM-Correcting Note — On KaloBios Bankruptcy Procedural Motions

February 7, 2016 - Leave a Response

Some main stream media outlets were reporting on last Friday that KaloBios’ lawyers had “beaten” (for the moment, at least) the DoJ’s request to have an independent US Trustee appointed, over the KaloBios bankruptcy proceedings, in Delaware’s federal District Court.

That is true — but incomplete.

That sort of a request — for an independent trustee — may be effectively renewed, at several subsequent points — in any corporate bankruptcy, like the one KaloBios filed. And it may be renewed by creditors (like the people who lost essentially all of their $8.2 million — in the latest private placement — which closed the night before Mr. Shkreli was arrested), not just the DoJ.

So that part of the play is far from over — just so everyone is clear. [Recent backgrounder here.] Onward, on a mild, sunny February day — to work out!

Preliminary Thoughts — On What Might Come From The KaloBios Bankruptcy

February 6, 2016 - Leave a Response

There is no public listing of the creditors — on file in the bankruptcy courts, yet — and the investors who bought KaloBios common stock in the most recent $8.2 million private placement (which closed the day before Mr. Shkreli was arrested) are all suing for the return of their funds (so they too will be creditors of the bankruptcy estate). That makes it very hard to say — at this early stage — how it will all turn out.

I will add to this in due course, it will be a work in progress for a bit.

That said, I think it highly likely that none of Mr. Shkreli’s equity interest in KaloBios will survive the bankruptcy. That is, he will almost certainly no longer hold even a small bit of the stock, as KaloBios exits bankruptcy protection some 15 to 20 months from now.

If it exits, at all.

I say this because Mr. Shkreli’s current KaloBios equity will be the source of the return of the investors’ funds, in the securities suits — if there is any value in those shares. [This assumes he receives those same shares back — from the pledge he made of them, in order to make bail, on the criminal matters (seven felony counts) in the federal District court, in Brooklyn. And who knows whether his new criminal lawyers have a claim to the bail securities, as well — to secure their fees. Even so, I expect the shares will be released in time by the federal courts.]

To the extent that there is any value in Mr. Shkreli’s hands after that, it will almost certainly be reorganized, and transferred to unpaid creditors of KaloBios. But I honestly don’t expect there will be much left, even if KaloBios is able to close this still very tenuous Chagas neglected tropical disease (and FDA priority voucher) deal with Savant. I’ll be able to flesh that out with actual figures, once we see the list of creditors in the bankruptcy filings. But we do already know that several universities are large creditors — owed millions for running clinical trials for KaloBios — and they will be in line to collect in the bankruptcy court, too.

So — as I say — this is mostly a placeholder, for now. I will also say that any other assets (the $2 million Wu Tang recording included, here) Mr. Shkreli holds at present, will be used to satisfy the Retrophin securities plaintiffs, and the earlier hedge fund plaintiffs, assuming they win at trial in the civil matters. He is almost certainly broke — it is all over but the shouting, now — he just doesn’t know it yet. G’night one and all. . .

What (In Bankruptcy) KaloBios Is NOT Saying About Its Chagas Negotiations With The Savant Entities — Shkreli’s Cultural Persistence, There

February 5, 2016 - Leave a Response

bc667-mrk-savant-kalobios-chagas-2016 There a few very important threshold points to understand here, before we get to the latest story, proper: (1) The acute cases of Chagas are a very serious and persistent threat — but in a very limited geography. That geography, for the acute cases, mind you — DOES NOT include the United States or its possessions. In fact, only seven acute cases have been documented in the United States, since the 1950s. [While there are people in the US who’ve seen the kissing bug (by which Chagas is transmitted — seen at right), and have come into contact with the bug’s feces, after a bite, and thus express anti-bodies indicating exposure to Chagas — not one of them has manifested as an acute case, in over two decades. See point (4).]

(2) There ALREADY is an effective treatment for Chagas, right now — it was developed over three decades ago. It is being used (very economically, too) in most of Latin America — by doctors, clinics and hospitals — pursuant to delegated local, in-country authority, today. That effectively addresses the “acute case” threat, in those geographies.

(3) The tempest in the teapot here is that this old treatment was never FDA approved, for use in the US. But that matters almost not at all, because. . .

(4) Any patient in the US who might present exhibiting an acute case of Chagas could be treated with the drug now in use in Latin America, and safely, too. And now we are to the part that Martin Shkreli (still in-bankruptcy KaloBios’ largest shareholder, by the way) and his minions are NOT telling you: under long-standing informal FDA practices, if an appropriately licensed and reputable doctor in the US were to prescribe the existing (Latin American) course of treatment to his or her acute patient, the FDA would almost certainly not intervene. In addition, the current drug is cheap, so even if the patient’s insurer balked at covering an unapproved or (solely for the purpose of the US discussion) an “experimental” drug, the total cost would come in somewhere around $600. [Upon MSM request, I will provide the footnoted references for all of these statements, above.] It is true that, in theory, the US FDA could ask the doctor to provide evidence of safety — and the doctor would simply point to two decades of treatment in Latin America — of tens of thousands of acute cases in remission. But we might be talking about two or three actual acute patients in the US, the next decade — so, FDA is unlikely to intervene. People often forget that FDA has only limited jurisdiction when a doctor and patient agree on a course of treatment (after a full informed consent, documented in writing) — so long as no US drug manufacturer is trying to influence that course of treatment, and the course of treatment is generally regarded as safe — the US FDA has rather limited authority to regulate the doctor’s private relationship with his or her patient. Got all that?

So — now that all that background is laid out — here is what makes KaloBios so interested in the old drug’s approval in the US. If KaloBios submits a full blown new drug application, and runs clinical trials on the old drug, to essentially document the Latin American experience (and does so successfully), FDA will grant KaloBios a “neglected tropical disease” approval. What would come with that neglected disease approval (at least in theory, under FDA’s recent rules) is a fully-transferable “FDA priority review” voucher, for any other drug candidate at all. [To be fair, this all has to do with the way the Congress enacted these changes. But I’ll grant that the Congress-folk could not have foreseen the sudden rise of such an entirely feckless, purely charred-soul pirate, like Martin Shkreli, in my estimation — which is how we’ve all landed right here, right now.]

Now, the take-away, for such pirateering? Well, the last such voucher issued sold for $325 million — and earlier ones fetched between $100 million and $200 million. That was what Mr. Shkreli was angling for, in the days prior to his arrest in Manhattan. [Other large pharma concerns will pay dearly to cut in line, and effectively get VIP all-access passes — shaving several months off of the overall FDA approval time-line for one of their other, true US blockbuster candidates-in-waiting.] My educated guess is that it might cost KaloBios $20 million to run the Chagas trials — so a huge win.

You may ask why FDA would allow such a windfall/abuse — all created from a disease (Chagas) that might only acutely affect seven people, nationwide. You would be right to ask, but what we see here (in the Shkreli/KaloBios case) is an outer-limits abuse of an otherwise complex set of recent regulatory changes. FDA should be applauded in my view, for trying to create real incentives to get large pharma concerns to address neglected diseases, especially in the Tropics. These amendments got their start in Congress. [Think now about Zika virus — such a program incentive could well speed development of a Zika vaccine, by the big pharma houses, even though they might never make their money back, in the US, on the vaccine itself. And, when developed — just like the Ebola candidate vaccine — it will have to be priced at a only few dollars per course of innoculation, to face the reality of the limited monetary resources in — again, still developing economies (i.e., where the burden of disease falls most ponderously). I should note that Merck will be eligible to acquire just such a voucher, by bringing the NewLink-licensed Ebola vaccine candidate, through to approval by FDA.]

So the Congressional (and now FDA-administered) voucher idea is a sound one — but may lead (as all things do, in my opinion) — to abuses, at the margin.

I would also say in passing that I understand the people left at KaloBios (i.e., not Martin Shkreli) are trying to hold on to that company’s only real shot at emerging from bankruptcy intact: that potential of a $300 plus million voucher sale/payday, some 18 months from now — if all were to go well, in the Chagas clinical trials.

Now we come to Savant’s part of the story, though. Savant affiliates have acquired the rights to the old Chagas treatment — and claimed yesterday, in Delaware bankruptcy court, that they would still sell those rights to KaloBios, but only IF the court does NOT appoint a special Trustee over the bankruptcy, and potentially convert from a reorg, to a liquidation — a Chapter 7.

I do understand that the Savant people are just protecting the certainty of their potential business deal. But I must point out that Mr. Shkreli’s KaloBios signed a “partially binding” letter of intent with Savant, only 16 days before his arrest on seven felony securities fraud charges. He was well-aware of the FBI/DoJ/SEC investigation for several months prior to that time. So I must ask — why wouldn’t Savant seek a new — more stable and reputable partner — for this deal, from here forward? Savant, in the exercise of its own fiduciary duties, to its holders, ought to be looking for ways to terminate the “partially binding” letter of intent, or at least have second and third options under discussion — should the bankruptcy court agree with the US Trustee (as advised by the DoJ and SEC) that only an independent Trustee will effectively sort out whether Mr. Shkreli’s puchase of control of KaloBios was with fruits from his prior allegedly felonious conduct. [More on that, in the next installment, which is now up (as of Sunday morning, the 7th) right under that link. More to come — in the coming weeks.]

In closing (whew!), there is a BioPharma Dive article, this morning, on some of the bankruptcy issues — which is good, as far as it goes — (especially about Savant’s potential for cold feet, here) but it doesn’t remotely tell the rest of the story. That, I will tell right here, in the next installment. Probably after the Super Bowl. . . we will see.

Because pricing and access are two issues that cut across all of the life-sciences, I will cover this little microcosm created by Martin Shkreli, from time to time. [My partially-fleshed out, older backgrounder on it all, is here.]

Namaste, one and all — and I just hope for a good close game on Sunday — I’ll be happy with either team prevailing. . . smile.

Federal Propecia® MDL Update (NYED): Judge Gleeson Has Retired — Case Likely To Be Reassigned To Judge Brian M. Cogan

February 4, 2016 - Leave a Response

I’ve waited about a week here, to blog this Propecia® products liability litigation update — as I wanted to be able to pass along the likely name of the federal District Court Judge, also sitting in Brooklyn, to whom this MDL will likely be re-assigned.

Overnight, that formal suggestion was filed with the court. The recommendation to the Chief Judge is that the very able Judge Brian M. Cogan be assigned to MDL No. 2331. Here is that PDF file — and here is a bit from the earlier status conference agenda, at which the possibility of that reassignement was first disclosed, last week:

. . . .1. Review PPO No. 10 Discovery and Trial Plan;

2. Update on judicial reassignment following the Honorable Judge John Gleeson’s retirement; and

3. Schedule the next status conference.

Dated: January 29, 2016. . . .

Now you know — and onward, as Martin Shkreli tweeted (at 9:15 AM EST) that members of Congress are “imbeciles” — at the same moment he was apparently taking the Fifth, in the Committee’s hearing chamber — and this, after promising his lawyer that he’d stop tweeting such garbage. I think a criminal Contempt of Congress charge may be brewing for him. . . perhaps more on that, late this afternoon, including the KaloBios angle on Chagas treatments — now playing out in bankruptcy court. We’ve covered that before, so an update is in order. For now, though — onward!

Color Me Skeptical Here — Is It THAT Valuable To Pharma? Or, Will It (Further) Alienate The Doctors?

February 3, 2016 - Leave a Response

Okay — first, Zephyr Health may well be on to a bleeding edge big data trend here — and, I’ll allow that if it can truly streamline a doctor’s day — and only match valuable introductions, on both sides, there is a quite-viable business model, here. But if (on the other hand) the “info-mercial” like tone of the below article is what the sales pitch is really like . . .well, you’ve been warned.

Having helped many a busy doctor, across many practices — as their lawyer, for many years — I suspect that the best and brightest will find this level of automated data mining. . . off-putting, at best. I note that the company doesn’t have an internal general counsel, but has over one hundred employees, actively aggregating (what they claim is) real time health care provider-level data. That’s. . . courageous. I am all for data-based decision making, but the idea that the pharma rep comes armed with all the data from your last ten visits, and prescribing patterns, from this very morning. . . well, that is troubling — I think.
But maybe I’m just old-school, here. Read the below snippet — or the whole Bloomberg article, and pipe up, in comments: Does this rub you the wrong way? Do let me know.

. . . .Tracking ‘Valuable’ Doctors for Big Pharma. . . .

Pharmaceutical companies are now searching for ways to. . . target the doctors most compatible with the medications they’re pitching. “You’re desperate for data to make those key decisions,” says Lance Scott, a former marketing manager at medical-device maker Abbott Laboratories. “But while there’s lots of data out there, it’s really challenging to bring it together.” Scott’s now chief executive officer of Zephyr Health, a data analytics startup promising to help drugmakers identify key medical personnel and find ways to approach them.

Zephyr builds digital dossiers on individual doctors. It starts with basic information on prescription patterns from data clearinghouses such as IMS Health and Symphony Health Solutions. Then its software, with some human assistance, scours the Web for more details. For example, a calendar of speakers scheduled for a prominent medical conference may point to a specialist well-regarded by her peers. Steady publication by another doctor in scientific journals offers clues to the kind of research he does. A physician who’s a board member of an industry association might have a hand in writing treatment guidelines — and thus be the focus of a drug company’s outreach. . . .

Scott says Zephyr updates its physician profiles in near-real time, a serious advantage over hand-culled databases. His 100-employee team is working to refine the software’s predictive capabilities and add more data on which patients take what drugs. “There’s nothing private anymore. . .”

I completely understand why most life-sciences companies declined to be identified as clients of the service Zephyr Health offers. The opinion leader docs might well frown on it.

Gooodnight, one and all — and sleep tight! — I’m out.

[U] “Our” Merck Now Holds More Than 7.7% Of Newly Public BeiGene, Ltd. (An Immuno-Oncology Bet)

February 3, 2016 - Leave a Response

UPDATED: 02.03.2016 @ 5 PM EST — Based on tonight’s closing NASDAQ price of $28.32 (first full day of trading on the NASDAQ, for BeiGene, Ltd. American Depositary Shares), I calculate the 23.6 million shares that Merck affiliates now hold (when converted, 13 for one, to ordinary shares), as being worth well over $50 million. Of course, this is a paper gain at the moment, but not bad — for an initial pair of $10 million loans, bearing 8 per cent simple annual interest, over four years (or around $29 million originally owed to the MSD affiliate, from BeiGene, if settled in cash). Not bad, at all. Well done, Kenilworth!

Friday Update: the final prospectus puts Merck’s holdings at 7.7 per cent (see page 230) of all BeiGene’s outstandings — because the underwriters exercised a so-called Green Shoe option (for a long departed company!), and up-sized the offering. Now you know. [End updated portion.]

Ahem. We will back our way into this story: Back in February of 2011 (just four years ago, yesterday, in fact), an overseas affiliate of Merck made an initial $10 million loan to BeiGene, in China. The terms of that note have been restructured , increased and renegotiated a few times (with the lent principal increasing to some $23 million), over the ensuing four years, and those terms now provide a convertible feature — into a specified number of BeiGene’s American Depositary Shares (i.e., freely trading) as of the time the IPO priced, but indeterminent, until then.

Overnight, that IPO was priced, and led by Goldman Sachs & Co., and Morgan Stanley. So, as of this morning, Merck is entitled to acquire well over 10 per cent of BeiGene, without making any additional payment, under the revised note terms, as of January 26, 2016.

We won’t know until the IPO closes, and related SEC filings are made — just how much of BeiGene the Merck affiliates own — but this SEC Form 3 (also filed overnight) means that it will definitively be over 10 per cent. We will update, when that figure is known with certainty.

MRK-BeiGene-SMIn the mean time, here is what BeiGene says it does, via its IPO prospectus — “. . .[BeiGene is] a globally focused biopharmaceutical company dedicated to becoming a leader in the discovery and development of innovative, molecularly targeted and immuno-oncology drugs for the treatment of cancer. We believe the next generation of cancer treatment will utilize therapeutics both as monotherapy and in combination to attack multiple underlying mechanisms of cancer cell growth and survival. We further believe that discovery of next-generation cancer therapies requires new research tools. To that end, we have developed a proprietary cancer biology platform that addresses the importance of tumor-immune system interactions and the value of primary biopsies in developing new models to support our drug discovery effort. Our strategy is to advance a pipeline of drug candidates with the potential to be best-in-class monotherapies and also important components of multiple-agent combination regimens. Over the last five years, using our cancer biology platform, we have developed clinical-stage drug candidates that inhibit the important oncology targets Bruton’s tyrosine kinase, or BTK, RAF dimer protein complex and PARP family of proteins, and an immuno-oncology agent that inhibits the immune checkpoint protein receptor PD-1 [emphasis supplied]. . . .” Well, that seems a close-fit with Merck’s Keytruda program, no?

In passing, and in a footnote form, fraught with complications — I will note that BeiGene ALSO has extensive relationships with the German Merck (Merck KGaA — no relation). If I feel ambitious tonight, I may detail those — but I will confidently guarantee that MSM outlets are going to confuse the one that owns shares (i.e., ours) with the one (i.e., German — Merck KGaA) that is primarily conducting research collaborations with BeiGene. I didn’t see anything that indicated Merck KGaA owned a substantial number of shares. But it might. Yikes! These folks need to solve that name confusionpronto.

The Deeper Dive — How F/X Affects Merck’s Gross Margins: 2015 Full Year Results

February 3, 2016 - Leave a Response

I’ll take just a moment here, to discuss something I don’t see other life science analysts talking about — buried in Merck’s full year results call, this morning. It is a bad news/good news sort of item (and it manifests itself at Pfizer, J&J, Abbott, Baxter, BMS and Lilly — and all the others, to varying degrees). By now, regular readers know that (generally speaking) a strong dollar decreases reported revenue growth, in a US multinational like Merck. Kenilworth does a very good job of mitigating those gyrations with currency hedges. That’s all true.

The more nuanced (and interesting) effect is — when you look at Merck’s two percentage point improvement in its full year gross margins, over 2014 levels — the company attributes the bulk of that to F/X. [See toward the bottom of the press release — last several paragraphs.] Decoded, that means that Merck is receiving asset-hedge “leverage” at the operating income line. Said another way, Merck’s non-US operating assets are increasing in local value even a little more than reported US dollar sales (when reported back into the US, from non-US sources) are declining. Or, the non-US operating expenses are decreasing, more — due to F/X gyrations — when reported back into US dollars.

This (per force) leads me to three conclusions — in turn: (i) Merck’s continued gross margin improvements — in the year 2016, and beyond — may not appear in full, without continued strong dollar gyrations SGP-cong2(i.e., unpredictable, non-recurring, largely external macro factors); (ii) with Congress and all the credible candidates for President howling about price increases, Kenilworth will have tough sledding — on any program of continual price increases, as a way to boost margins domestically; and so. . . (iii) without more bolt-on M&A deals, Merck is not likely to get significant gross margin improvement — in the next (election cycle) year. The M&A will have to be for premium priced opportunities — not the “also rans”.

For what it is worth, this is true of the whole list of multinationals I rattled off, at the top, here. Of course, Merck is lucky to have Keytruda (a clear premium price garnering franchise), just as BMS is lucky to have Opdivo. But we already see that Merck is slashing prices, in the Hep C space, to try to take share from Gilead’s premium priced Harvoni (and Sovaldi). This makes Merck’s less than stellar full year 2015 sales numbers — on Januvia and Janumet — more than a little worrisome. And growth in Zetia now faces generic entrants in 2016 — so that will not be of much help, either. Merck is still a great stock to own, at the mid $49-level (i.e., today’s NYSE price), but that’s my rather acidic take, on the press release, this morning. Onward — with a huge grin!

Unconfirmed Rumors Department: Will Sanofi And Merck Part Ways — And End SanofiPasteur MSD (EU Vaccines) Joint Venture?

February 2, 2016 - Leave a Response

IF (and the emphasis here is on “if“) this is more than a mere rumor, we may well hear a bit about it on the earnings call tomorrow morning.

However, I suspect if serious talks are underway to unwind, they won’t be announced until mid-summer 2016. The untangling of Sanofi and Merck operations (and cross-licensing vaccine know-how), could take quite a bit of time — and one would not want to hastily pre-announce a split — only to run into snags later. [Here is the last bit of strongly positive news out of the JV — which we covered a full three years ago, now — as background.]

On the other hand, to make a bit of a case for the split rumor, it is true that Merck did go it alone, on the Ebola vaccine, and Sanofi has its own complement of vaccines in the EU, which it doesn’t share with MSD (US Merck’s name over there). Add to this that there’s been no JV revenue growth, in seven of the last eight quarters, and it might make more sense for Sanofi to buy its way out of the twenty year old JV. Here’s a bit from Bloomberg overnight — but do go read it all:

. . . .The joint venture, known as Sanofi Pasteur MSD, had revenue of about $330 million in the first six months of last year. It supplies almost half of Europe’s flu vaccines, as well as shots against shingles and the cervical cancer vaccine Gardasil, in Europe. Sales have grown in only one of the past seven quarters. . . .

I’ll cover the year end results tomorrow pretty early. Onward!

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