Officials of Suffolk County, New York Allege Schering-Plough Committed “Indictable” Acts Under RICO — Newly-filed Civil Suit

The county government of Suffolk County, New York has filed a new civil suit against Schering-Plough (and the Joint Venture, and Merck, among others), overnight, in the federal district courts sitting in Newark, New Jersey. It makes some Consumer Protection Act/False Advertising allegations, but it also takes important new strides in alleging RICO pattern activity — calling Schering’s and Merck’s conduct here “indictable“.

“Now, that’s gonna’ leave a mark!” Take a look — click to enlarge — see the yellow bubble, and the red underlining, here on page 25 of the complaint:

Suffolk County, New York — a governmental entity, now — is alleging that Schering has engaged in what it sees as indictable predicate acts, under the RICO statutes.

There are already other RICO putative class action cases pending against Schering-Plough and Merck, but this is quite significant, in my experienced-estimation — as at a minimum, it represents a new level of gravitas in the ENHANCE litigation malestrom now beseiging Schering-Plough and its executive leadership: a local-governmental agency is now effectively swearing that Schering has committed “RICO-indictable pattern racketeering” — in (allegedly) concealing the ENHANCE results for almost two years — while the good people of Suffolk County, New York were forced to pay greatly-inflated prices for a drug that was no more effective than those much cheaper statins.

For those keeping score at home, the suit is captioned Suffolk County, NY v. Merck Schering-Plough, et al., (Case No. 08-3711, Complaint filed July 28, 2008, DCM-MF, U.S. Dist. Ct., NJ).

I’ll keep an eye on this one, for the readership. You may count on it.

EU Approval of Bridion® (sugammadex) — about 2.4 cents ONE PENNY per share of 2008 EPS — in the "Very Best" Case.

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U P D A T E D
08.01.08 @ 8 AM EDT:
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FDA declares the drug “non-approvable“. Ouch! So much for that $600 million. Said another way, the about 2.4 cents I posited below in 2008 Schering EPS, just became about one single little penny, in added EPS — for the foreseeable future at Schering. How much has been spent, thus far, to garner that one shiny penny? I dunno. Yikes.

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This afternoon, Schering announced that it had received EU approval for sugammadex, its new anesthesia drug. That is good news for the besmirched pharma-company. It just won’t amount to much, any time soon, in my analysis. Here is something I just wrote, albeit for another purpose. I’ll clean it up a little, later — but you’ll get the gist of it, right now:

The fact is today’s EU approval of Bridion^®, or sugammadex, won’t be enough — enough to cover the 2008 hole Vytorin has created.

Last year, in June of 2007, pre-acquisition Organon had this to say — putting its very best face on sugammadex’s market potential (press release), to lure Schering to pay-up, on acquisition:

“. . . .Organon said the global market for the drug is estimated at 400 million euros ($537 million) and could be higher. . . .”

So, Global sales of let’s call it $600 million (we see a weaker dollar now) — and, let’s say it has a 30 percent margin (probably a little too generous, but so what?), then its gross WORLDWIDE contribution to pre-tax earnings (and ultimately, after-tax EPS) will be around $180 million.

But wait! — suggamadex is not approved in the United States — and may not be, until 2009 (if one reads the FDA tea-leaves carefully), so. . . .

Let us also assume that Europe will be about 30 percent of the gobal market (again, very generously!) — then the gross contribution of sugmamadex will be around $54 million, max, in 2008.

Spread that $54 million over 1.637 billion common shares outstanding (last SEC Form 10-Q), and the pretax EPS is 3.3 cents a share — after tax (assuming a 28 percent tax rate) it would be. . . .

2.4 cents per share of 2008 EPS – the 2008 Vytorin “hole in earnings” or EPS, is something like 42 cents a share of 2008 EPS (doing the math, here, from Merck’s Q1 2008 projection of $700 million of Equity Income fall-off due “solely” to the Cholesterol Joint Venture’s mishaps).

So, my best guess is that sugammadex (while a nice little pick-up) will not really matter — it won’t “move the needle much” even when the US approval ultimately comes — it won’t be nearly enough to “right the good ship Schering-Plough“. QED.

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U P D A T E D
07.30.08 AM
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Financial Analysis/Math is an acquired skill-set, folks. At a 12 times Schering-Plough P/E Multiple, then, that 2.5 cents yields 25 cents in share price increase (today’s open) — but then we must net that, against over $4.80 ($0.42 times a P/E Multiple of 12) “in the hole” [mostly owing to the uncertainties -- still to come], due to ENHANCE-Vytorin fallout. And this stock skids sideways, rather than climbs (like now). But what do I know?

Officials of Suffolk County, New York Allege Schering-Plough Committed "Indictable" Acts Under RICO — Newly-filed Civil Suit

[UPDATED -- 07.29.08 4 PM EDT: Ed, over at Pharmalot, has featured this post! Cool!

11 PM EDT: Dr. Peter Rost has also linked, and featured the graphics from this one. Perfect! Thanks!

Later, Still: The Insider, across the pond, at PharmaGossip has linked this one, as well! Geez -- I guess that's a trifecta, of sorts!

07.31.08 AM-- Chris Truelove, at the Pharma Blog Review has run a teaser on this story, at the end of his, this week. Cool.

07.31.08 PM-- Adventures in Autism has captioned her link, to mine the "Merck Mafia(!?)" -- Ouch!]

The county government of Suffolk County, New York has filed a new civil suit against Schering-Plough (and the Joint Venture, and Merck, among others), overnight, in the federal district courts sitting in Newark, New Jersey. It makes some Consumer Protection Act/False Advertising allegations, but it also takes important new strides in alleging RICO pattern activity — calling Schering’s and Merck’s conduct here “indictable“.

“Now, that’s gonna’ leave a mark!” Take a look — click to enlarge — see the yellow bubble, and the red underlining, here on page 25 of the complaint:

Suffolk County, New York — a governmental entity, now — is alleging that Schering has engaged in what it sees as indictable predicate acts, under the RICO statutes.

There are already other RICO putative class action cases pending against Schering-Plough and Merck, but this is quite significant, in my experienced-estimation — as at a minimum, it represents a new level of gravitas in the ENHANCE litigation malestrom now beseiging Schering-Plough and its executive leadership: a local-governmental agency is now effectively swearing that Schering has committed “RICO-indictable pattern racketeering” — in (allegedly) concealing the ENHANCE results for almost two years — while the good people of Suffolk County, New York were forced to pay greatly-inflated prices for a drug that was no more effective than those much cheaper statins.

For those keeping score at home, the suit is captioned Suffolk County, NY v. Merck Schering-Plough, et al., (Case No. 08-3711, Complaint filed July 28, 2008, DCM-MF, U.S. Dist. Ct., NJ).

I’ll keep an eye on this one, for the readership. You may count on it.