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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: Twitter: Dereklowe

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February 11, 2011

Merck, J&J, and Remicade: Waiting Nervously

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Posted by Derek

Is Merck going to hold on to Remicade (and its follow-up) or not? That topic came up around here (and not just here) right after the merger with Schering-Plough was announced - it was the whole reason for the elaborately structured legal charade that Schering-Plough was buying Merck, after all. The issue is in arbitration, and a ruling could come any day now. Or in the spring, or who knows - but Wall Street is starting to bite its nails.

It'll be easy to spot when the decision comes down. Merck stock will suddenly move a good 5 per cent - but in which direction? I'll go ahead and get my prediction down, in case we get word soon: I think Merck will lose out. The best that they can hope for, I think, is a fairly small share of the profits, and they may well not even get that. Whoever advised Merck's executives that this issue could be finessed - and the executives who believed that theory - will, in that case, not come out looking very good at all.

Comments (14) + TrackBacks (0) | Category: Business and Markets


1. Hap on February 11, 2011 1:55 PM writes...

The Merck-Schering-Plough deal is looking like a really good example of the flaws of the "merge yourself into greatness" model.

Whoever thought that thumbing their nose at the J+J/SP agreement (by naming the new "Schering-Plough" Merck and by giving S+P CEO his transfer parachute) should have been removed rapidly anyway. Unless you're a CEO, billion-dollar oopsies don't give you job security.

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2. Fred Hassan on February 11, 2011 3:37 PM writes...

I told them it would all be fine $$$

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3. Hap on February 11, 2011 5:09 PM writes...

The article says that Merck investors are generally expecting them to win their case with J+J (and hence that a win won't help Merck's stock much). Why? Is the clause unenforceable, or is there considered to be no change of control (despite the name change and the payout to Hassan over change of control)? I'm not understanding this.

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4. cynical1 on February 11, 2011 6:24 PM writes...

@Hap - There is not a more misinformed group of people than the so-called "investors" as near as I can tell. Remember, these are the guys who believe all that crap the CEOs spew like the value of megamergers, off-shoring, increasing productivity through layoffs, genomics, proteomics, combichem, ect. ect. ect. How many people who work in our industry would invest in Merck or J&J stock right now? (One of them can't even get the stink out of their pills after a year or so of recalls.)

I heard that Warren Buffet gave advice for people to invest in what they know. I don't think many investment people really understand our industry. I understand it well enough to not invest in it at all.

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5. Anonymous on February 11, 2011 6:32 PM writes...

#4 - And you want a proof how misinformed they are? Every time there is a mention of Remicade, it is always as the 'Arthritis drug Remicade'. Remicade gets most of its value out of inflammatory bowel diseases (mostly Crohn's disease) where it own a much bigger market share and is used at a higher dose than in rheumatoid arthritis.

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6. Hap on February 11, 2011 6:48 PM writes...

The smallcap stock people with investments in pharma seem pretty nuts when they come out to feed, but I would have figured institutional investors would have had better advice and better access to knowledge (isn't that what they're paying all those investment fees for?). Particularly with all the pharma layoffs, I would figure that someone in investment might have a clue about pharma.

I can understand Buffett's advice, but I don't know if people could actually invest in anything if comprehensive knowledge were a requirement. Of course, sanity would help.

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7. anon on February 11, 2011 7:22 PM writes...

Will Clark be punished? His chairmanship should be hanging on this.

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8. Anonymous on February 11, 2011 7:54 PM writes...

Clark will be punished as much as Hassan was...only the lowly worker bees will be punished with another round of lay-offs to make up for the loss.

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9. Anonymous on February 14, 2011 6:54 PM writes...

Med chemist and avid investor.

I don't go near Pharma stock... EVER!

This whole culture I feel stems from academia, everyone sells their wares as the latest and greatest while taking the taxpayer/investor for an expensive ride.

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10. Anonymous on February 15, 2011 11:42 AM writes...

The executives that thought this plan up and believed it will work are still running the company today - Frazier, Kim, etc. Who gets to point the finger at whom when/if this reverse merger idea flops???

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11. Anonymous on February 15, 2011 11:47 AM writes...

It seems most inestors still don't realize the difference between the US Merck (called MSD in EU) and the German Merck (called EMD-Serono in US). When either "Merck" has good news, both stocks go up. If either has bad news, both go down. Know your industries, investors!

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12. Anonymous on February 15, 2011 11:49 AM writes...

It seems most inestors still don't realize the difference between the US Merck (called MSD in EU) and the German Merck (called EMD-Serono in US). When either "Merck" has good news, both stocks go up. If either has bad news, both go down. Know your industries, investors!

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13. JGault on February 21, 2011 12:28 PM writes...

I have read the J&J/SP agreement on Remicade and there is no way Merck wins this one. The agreement states that a change in control of SP is defined as a 50% change in board composition. J&J laywers had this one covered, best Merck can hope for is a settlement which gives them a small piece of the pie to save on legal costs.

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14. Anonymous on February 22, 2011 6:14 AM writes...

Why should I invest in the new Merck or in the new Schering Plough, cannot find a single reason. One blockbuster, may be two ! if Remicade is kept?
And none in the pipeline. I would not call Simponi a potential blockbuster not being developped in gastroenterology and more than 100000 employees to feed. Fred Hassan has never been interested in upstream investment, only short term!!!!If J&J get Remicade and Simponi, the new company will sink

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