Simply To Complete the Factual Record. . . .

I did not cover this part of the May 27, 2009 “Investor FAQ” document, in my original post — but here it is:

. . . .Q: Can you provide an update on the PEGINTRON melanoma regulatory application in the U.S.?

A: Schering-Plough has amended its application with the Food and Drug Administration (FDA) for the use of PEGINTRON (peginterferon alfa-2b) in the adjuvant setting in node positive melanoma. The company anticipates a six-month review by FDA.
The submission of this amendment was in response to a Complete Response Letter received in March 2008 from the FDA regarding its supplemental biologics license application for melanoma. In the letter, the agency requested additional information and clarification of submitted data.

Outside the U.S., the application is currently under review in selected countries. . . .

It is interesting that it took Schering-Plough over a year to collect and finalize the response to FDA, on melanoma. Is this [yet another] “please read between the lines” version of disclosing potentially-disappointing future news? I dunno. In any event, here is an image from an archived piece of mine on the main market for Schering-Plough’s Pegintron:

[Note: Click above image, to enlarge.]

Why Is Schering-Plough’s “Investor FAQ” Archive Page No Longer Indexed on Its Site?

Only yesterday, inside a post of mine, I hosted three links to various pages and PDF documents that reside on the “Investor FAQ” page [inside the "Investor Relations" Section] of the Schering-Plough Corporate Website. This is a page to which Kenilworth added new material, only yesterday. And tonight, finding this new material just got tougher. Hmmm.

While these pages are all still “there” — they are no longer on the Corporate Sitemap, nor are they listed in the “Left Sidebar” — of available sub-pages. Odd. Now, to see that these links still work, click below on the three links, as I posted them, verbatim, yesterday:

. . . .Kenilworth also issued an overnight “Investor FAQs” (PDF file) document.

Because Schering-Plough has chosen to speak about these presumably material matters, it would be fair to ask whether Schering-Plough’s view is that there is nothing material to report about monthly IMS ’scrip data on the Cholesterol Franchise Joint Venture, Vytorin and Zetia. For thirteen consecutive months, ending in on January 20, 2009, Schering-Plough provided updates on these IMS monthly trends. It then said that it would stop doing so, as trends were “generally stabilizing“. . . .

Yep. Click those three links — the pages are all still “there“. Now, look at these screen-caps, from mere moments ago [Click each image, to see full-sized version]:

[Click this link to verify that the above-page appears just that way, in full -- on the corporate website. If one clicks on "Investor FAQ", in the right-hand column -- the below "404 Error -- Page Not Found" is returned:]

[Click this link to verify that the top of the above-page returns this error, on the corporate website.]

[Again, click this link to verify that the above-page appears on the corporate website.]

[Once more, click this link to verify that the above-page appears on the corporate website.]

Now — just to be sure — go back and click the three links in the blue blockquoted text I set, from yesterday, up top. Yep. The documents are there — just not shown, in the index.

Quite. A. Puzzlement. No?

Honestly — I cannot help but wonder whether it is the fact that 13 months of Vytorin/Zetia Monthly IMS data reside there — then, starting with February 2009, an abrupt halt, which lasted for two months — then, Schering-Plough disclosed (on its Q1 2009 earnings conference call) a sequential quarterly 14.2 percent U.S. “down-bubble” — despite January 20, 2009 assurances (And February 3, 2009 assurances) of “generally stabilizing” monthly IMS ’scrip trends, for Vytorin and Zetia. That is what CEO Hassan said, on the February 3, 2009 call. Could this explain the index removals? I can think of few other plausible reasons to move the pages off the index, and site map.

On January 20, and February 3, 2009, CEO Hassan told the world that the cholesterol franchise sales decline had “generally stabilized” — and he would no longer report monthly IMS data — as a way of informing the equity markets, in a more timely fashion, of what Schering’s prospects might hold. Then came the March 9, 2009 proposed reverse merger announcement. Then the Q1 earnings call (and my semi-live-blog of it, under that link). What would the exchange ratios have been, on March 9, 2009, had the equity markets seen February 2009 Monthly IMS Data? What would have been the price, had the equity markets known of this continuing monthly deterioration in the the sales revenue, and thus fortunes, of Vytorin/Zetia? A deterioration that Mr. Hassan had said, a month earlier, was ending. Remember, Mr. Hassan did not stop receiving the IMS monthly updates — he just stopped disclosing them. I think the ENHANCE plaintiffs’ class-action securities lawyers will be interested in these facts.

It does seem, at first blush, quite plausible that Schering-Plough would want to make these specific pages harder to retrieve — why leave that “crumb-trail” for the ENHANCE securities fraud class action plaintiffs’ lawyers to find? [To say nothing of the staff at Corp. Fin., or Enforcement -- over at the SEC.]

Well — that “crumb-trail” is here, now. Permanently. You may bank on it.

What’s CFO “Sandman” Bertolini’s Sch-Merck-in’ Haul Gonna’ Look Like — Post Merger?

Just as I did with “Flight Attendant” Cox, and Mr. “Con-Air” Hassan, before him, earlier — I have made an “order of magnitude” estimate of the “all-in” payoff due Schering-Plough CFO Bob “Sandman” Bertolini, should he depart within two years of the reverse-merger’s closing date (other than for “cause” — i.e., only if he commits some truly-egregious error). Again, these figures do not make any estimate for IRS Section 280G payments — but if the same are due, he will be grossed up for them. [Click at right to enlarge.] Even without the IRS gross-up, he’ll come in somewhere between $90 million and $116 million – assuming he is let go by Merck.

Like Mr. Hassan, Mr. Bertolini’s take was greatly underestimated when The Wall Street Journal reported on this, last week — because the figures it relied upon made no estimate whatsoever of the equity values each executive receives, in compensation. I have corrected, in broad strokes, below, for this oversight. Note that for every $1 that Schering-Plough’s stock price rises above $22.91, Mr. Bertolini will receive about $5.2 million in additional payouts. If the merger were to close at tonight’s NYSE price of $24.05, Mr. Bertolini’s take would be almost $95.2 million.

So, more specifically, here: Mr. Bertolini is due various previously granted stock options of 250,000 shares (at $18.20), 50,000 shares (at $20.70), 200,000 shares (at $20.70), 48,000 shares (at $19.23), 192,000 shares (at $19.23), 276,000 shares (at $18.85), 52,000 shares (at $18.85) and 264,600 shares (at $22.91). So, all of these are exercisable at various prices between $18.20 and $22.91 per share. [I have dropped from the tally, the options that aren't likely to be in the money: they are 46,000 shares, and 184,000 shares, each exercisable at $31.57 -- but do not forget about these, if by some miracle, Schering-Plough trades into the $31.60 range by merger time.]

Don’t forget — he has his 208,000 share option “mega-grant” from November 2003 — exercisable at $15.87.

He also has the 2003-era 350,000 deferred stock units, and the February 27, 2009 deferred stock unit grant of 208,000 shares — free and clear. Finally — he has his “all other performance based” stock units covering 200,159 shares — if just the target amounts are paid out in 2009, and early 2010. Now, to calculate — [I advise making another Excel spreadsheet!] on the options, it is simply a matter of subtracting assumed NYSE market prices, from exercise prices — and multiplying by numbers of shares — to reach his potential gain, at any given NYSE quoted stock price. Similarly, on outright share-grants, one multiplies the full NYSE stock price, times the total number of shares — all of those share-gains are his to keep. Simple — and simply dizzying — given the sheer-size of these numbers.

For the top three, then — we are now approaching $300 million in likely payouts, post-merger. Where is that “Schering-Plough Survey on Executive Pay“, anyway? Did you send yours in? Be sure you do.

Trivia: There’s a Poll Over at CafePharma. . . .

. . . .Which asks whether that Nasonex Bee sounds (and/or looks) like CEO Fred Hassan. Do go take it — it is all in good fun.

I know. Trivial, right? Guilty as charged.

More substantive material — before too terribly long, now. . . .

New Schering-Plough “Investor FAQs” — But No Vytorin/Zetia Update. . . .

Schering-Plough has (to answer J&J’s presser) put out a J&J arbitration status press release, overnight. Kenilworth also issued an overnight “Investor FAQs” (PDF file) document.

Because Schering-Plough has chosen to speak about these presumably material matters (see below), it would be fair to ask whether Schering-Plough’s view is that there is nothing material to report about monthly IMS ’scrip data on the Cholesterol Franchise Joint Venture, Vytorin and Zetia. For thirteen consecutive months, ending in on January 20, 2009, Schering-Plough provided updates on these IMS monthly trends. It then said that it would stop doing so, as trends were “generally stabilizing“. Schering-Plough’s first quarter 2009 audited numbers told a different story, entirely — down another 14.2 percent, in sequential quarters, in the US. What will Q2 hold? Who knows, at this point?

Okay — from last night’s FAQs, proper, then:

. . . .Q: Can you provide an update on patient enrollment for the Thrombin Receptor Antagonist (TRA) phase III program?

A: We have a global Phase III development program for TRA that includes two studies: TRA for Secondary Prevention (TRA•2P TIMI 50) and TRA for Clinical Events Reduction (TRA•CER). These trials are designed to show whether adding TRA to standard therapy will reduce cardiovascular events such as cardiovascular death, heart attacks, strokes and the need for urgent coronary revascularization. The TRA•2P study is being conducted by the TIMI group from Boston and TRA•CER is being conducted by the Duke Clinical Research Institute. There is a common Data Safety Monitoring Board (DSMB) for both studies.

Currently, there are more than 22,000 patients enrolled at over 1,000 sites in over 30 countries between both trials. The Executive Committee of the TRA•2P TIMI 50 trial recently increased the target sample size of the trial from 19,500 patients to approximately 25,000 patients based on blinded aggregated clinical event rates. . . . [Editor's Note -- Sounds a little like the ENHANCE events; and a little like what we may soon hear on IMPROVE-IT.] . . . .we do not expect the increase in patient enrollment in the TRA•2P TIMI 50 study to impact the estimated completion of the trial in September 2010. The estimated completion date is based on the accrual of the necessary number of patients with clinical events, as well as a minimum of one year patient follow-up. . . .

Q: What is the status of the SAPHRIS (asenapine) regulatory application in the U.S.? When do you plan to file in Europe?

A: . . . .Schering-Plough has received a communication from the FDA that asenapine will be reviewed at an upcoming meeting of FDA’s Psychopharmacologic Drugs Advisory Committee (PDAC). A date for this meeting has not yet been disclosed. . . . [Editor's Note: Again, this portends a potential additional, newly-disclosed delay in the expected FDA approval date.]

More — as ever — to come.

The Rules Favor Compromises — in AAA-Governed Arbitrations

UPDATED — 05.28.09 @ 2:12 PM EDT: The AP is now updating its reports with this reaction, from Steve Brozak of WBB Securities: “J&J has a history of basically sticking to its guns,” he said. “You’ll probably see more give by Merck-Schering-Plough,” with them offering Johnson & Johnson a bigger share of the revenue to settle the dispute. . . . Indeed.

~~~~~~~~~~~~~~

Overnight, Johnson & Johnson announced that it filed a demand for arbitration on May 27, 2009. The key new piece of information here is that it did so, with the American Arbirtation Association. If the rules of that body, now in effect, are to govern this dispute, it is marginally more likely that Schering-Plough and Merck will have to surrender some part of the Remicade^® and Simponi™ rights — or, at least agree significantly enhanced royalties payable to J&J on all sales, ex-U.S. . . . I’ll explain why, after we look at the J&J press release:

. . . . In an arbitration demand filed today with the American Arbitration Association, Johnson & Johnson has requested a ruling that the agreement and plan of merger between Merck & Co., Inc., and Schering-Plough Corporation constitutes a change of control that would permit the termination of the agreements between Schering-Plough and Johnson & Johnson’s subsidiary Centocor Ortho Biotech Inc., regarding the product REMICADE® (infliximab), a well-established biologic product for inflammatory/immunological diseases, and SIMPONI™ (golimumab), a next-generation treatment. The termination of the agreements would return full rights to Johnson & Johnson for the distribution of these products in markets outside the United States where Schering-Plough currently has the rights to distribute these products.

“As its public statements have made clear, Merck is acquiring Schering-Plough,” the company said. “The acquisition constitutes a change of control that triggers the right of our Centocor Ortho Biotech subsidiary to terminate the agreements. . . .”

Now, here are the rules of commercial arbitration, from the American Arbitration Association, which rules will presumably govern this demand by J&J. Note particularly Rules 30, and 31:

R-30. Conduct of Proceedings

(a) The claimant shall present evidence to support its claim. The respondent shall then present evidence to support its defense. Witnesses for each party shall also submit to questions from the arbitrator and the adverse party. The arbitrator has the discretion to vary this procedure, provided that the parties are treated with equality and that each party has the right to be heard and is given a fair opportunity to present its case.

(b) The arbitrator, exercising his or her discretion, shall conduct the proceedings with a view to expediting the resolution of the dispute and may direct the order of proof, bifurcate proceedings and direct the parties to focus their presentations on issues the decision of which could dispose of all or part of the case. . . .

R-31. Evidence

(a) The parties may offer such evidence as is relevant and material to the dispute and shall produce such evidence as the arbitrator may deem necessary to an understanding and determination of the dispute. Conformity to legal rules of evidence shall not be necessary. . . .

Note the portions I have bolded — the arbitrator(s) “shall. . . expedite resolution of the dispute“. This rule reflects a bias against overly formalistic, lawyerly arguments, and a bias toward finding compromises both parties can “live with“.

Moreover, Rule 31 provides that the strict rules of evidence need not be adhered to, thus J&J may submit “common sense based“, and obvious public record data, as to whether Fred Hassan and Dick Clark are treating this transaction as a “change of control” transaction. Indeed, they are.

So, J&J is in particularly good shape here — as all it arguably need do is show that Schering-Plough’s reverse merger structure is an overly-formalistic, “cute-lawyering” attempt to avoid the obvious.

The “obvious” here comprising the “Change of Control” payments Mr. Hassan and the other Top Five EMT members intend to take, once the deal closes. “Ya’ cannah’ have it both ways, Mr. Hassan. . . .

More later — if I find time.

“What Bee? I Didn’t See Any Bee. . . .” — Nasonex DTC Hit

Click it to enlarge. Story here.

This commercial ran repeatedly — in a loop — before the Annual Stockholders’ Meeeting in Chicago, last week. That, along with the one of mini-skirted women in stilettos — mowing the lawn — for the new Dr. Scholl’s, for her — really showed some class. Nice. Here is the FDA’s guidance document — as a PDF file.

Latest Asenapine Study Primary Endpoint — Clank!

Like one of Shaq’s free throws (Clank!) — and more, soon — this from MedPage Today:

. . . .Long-term findings for the novel antipsychotic agent asenapine did not confirm any advantage over second-generation antipsychotics for negative symptoms of schizophrenia. . . .

Earlier in the clinical trials program for asenapine, an unhypothesized benefit turned up — it appeared to improve negative symptoms of schizophrenia significantly better than risperidone (Risperdal).

These negative symptoms, such as lack of motivation and social withdrawal, are far more likely to persist over time than are the core, positive symptoms of the disorder, “which have a much more waxing and waning form,” Dr. Schooler said.

To examine this potential advantage prospectively, the researchers conducted the Aphrodite 25543 study, which included 26 weeks of double-dummy treatment with asenapine (5 to 10 mg bid) or olanzapine (5 to 20 mg qd) in 481 schizophrenia patients who had higher negative than positive symptom scores.

Dr. Schooler’s presentation focused on the 26-week extension phase that followed for the 134 asenapine-treated patients and 172 olanzapine-treated patients that remained in the trial.

For the primary outcome of Negative Symptom Assessment Scale 16 scores, there was no significant difference between the drugs at week 52 (P=0.2344).

Likewise, they found no differences — and little change over time — for the positive symptom portion of the Positive and Negative Syndrome Scale (PANSS) or for the anxiety and depression portion. . . .

Oops.

Depositions Today, in “Sun Screen Battle Royale”. . . .

This ought to be entertaining today, in the lawyers’ offices, in New York — as the battle of the SPF, UVB and UVA experts gets underway:

Interesting Time-Line Stuff — “Dueling Patent Infringement Suits”, Updated. . . .

We now know (courtesy of the preliminary S-4 filing with the SEC, this week) that on May 5, 2009, Bill Weldon, CEO of Johnson & Johnson, formally notified Schering-Plough CEO Fred Hassan that he, and J&J, would invoke the mandatory arbitration clause — and seek the return of the international Remicade® and Simponi® distribution rights. Fascinatingly, on May 4, 2009 – Abbott sued J&J, for patent infringement — in the federal courts, in Massachusetts — alleging that Centocor’s recently-approved Simponi® (golimumab) infringed patents held by Abbott’s Humira®. Was that fight “the straw that broke the camel’s back“, the very-next morning? Here’s what I observed, that day:

. . . .Why do I mention all of these excesses of testosterone? Well, because I think these litigation “puts and takes” will at least marginally increase Johnson & Johnson’s desire to seek the return of the non-US rights to Remicade and Simponi, from Schering-Plough (via the “change in Control” escape hatch). That (mandatory arbitration) is a slightly less-thorny path (for J&J) to secure an estimated $3 billion per year in incremental revenue, as compared to protracted dueling sets of opposing patent litigation proceedings, in two separate federal courts, half a continent apart. I actually expect that Abbott and Centocor/J&J will ultimately settle their respective differences — working out reciprocal royalties, of some sort, on all US sales of each product — but that, in turn may well reduce J&J’s margins — in the US — on Remicade and Simponi.

And that is where the “rubber will likely meet the road” — as CEO Bill Weldon drives toward Keniworth, thinking about all those Euros, Pounds and Yen piling up on Remicade, and now, Simponi sales — and being booked, on a consolidated basis, month-by-month, into K-1 (and very soon, now — into Whitehouse Station). . . .

Indeed, it seems he acted on those thoughts, the very next morning.