Pespi “Sips” “GULPS” Schering-Plough’s Treasurer — in Another Pre-Merger Exodus Move

Per JustDrinks.com, Tessa Hilado is leaving Schering-Plough’s Treasuer role (with two-weeks’ notice), after only 13 months on the job — to join PepsiCo:

. . . .PepsiCo has announced that Tessa Hilado is to be its senior vice president, finance and treasurer, reporting to chief financial officer Richard Goodman.

Hilado, who replaces retired Lionel Nowell III, will take up her role on July 8, 2009. . . .

. . . .Most recently, Hilado was vice president and treasurer at Schering-Plough Corporation, where she has been since May 2008. . . .

Expect a lot more of this.

Have Merck and Schering-Plough Even Made First Required EU Anti-Trust Filing, Yet?

BR> The below is from page 99 of the as-amended SEC filing. As is often true, here, what is NOT there — is arguably more important than what IS.

What is missing is any indication that Merck and Schering-Plough have even “started the clock” (made a regulatory filing) with the EU authorities. I am still searching, but it appears that this 200-plus page mammoth SEC filing makes literally no mention of an actual EU filing having occurred yet. Take a look:

. . . .European Union

Both Merck and Schering-Plough sell products to customers based in the European Union. The EC Merger Regulation requires notification of and approval by the European Commission of mergers or acquisitions involving parties with worldwide sales and European Union sales exceeding given thresholds. Merck and Schering-Plough will file a formal notification of the transaction with the European Commission as promptly as reasonably practicable and advisable. The European Commission will have 25 business days after receipt of the formal notification, which period may be extended by the European Commission to up to 35 business days in certain circumstances, to issue its decision regarding the merger. If, following this phase I review period, the European Commission determines that the merger raises serious competition concerns, it would initiate a phase II investigation. The basic period for a phase II investigation is 90 business days, which may be extended to up to 105 business days if remedies are offered by the parties on or after the 55th day of the investigation. An additional further extension of 20 business days can also be sought in certain circumstances. . . .

But no mention of any EU filing, yet — and it is mid-June 2009. Doesn’t something like 50 percent of the combined companies’ pro-forma sales flow through EU-member countries? Yep — I think that’s true.

That August 7, 2009 date is looking more and more like a stalking-horse, to me. . . .

The AP “Gets It Right” — No “Simple Stenography” — Here, Today. . . .

I am mildly-encouraged. About 15 minutes ago, the AP added to its covereage of the amended SEC merger filings. Did the AP writers see my post, of about two hours ago, below? I dunno. I am happy with the balance, just the same:

. . . .While Merck, the larger of the two companies, is acquiring Schering-Plough, the deal is structured as a reverse merger. Schering-Plough will technically be the remaining company, but it will keep the better-known Merck name.

That’s being done in an effort to retain roughly $2.1 billion in annual revenue that Schering-Plough now gets from a partnership with Johnson & Johnson on global sales of the blockbuster arthritis drug Remicade, and a successor drug called Simponi recently approved.

Johnson & Johnson, of New Brunswick, N.J., is arguing the merger constitutes a change in control, which would permit its biotech division, Centocor, to terminate their distribution agreement and retain all revenue from the drugs. Centocor has started an arbitration proceeding to resolve the dispute.

According to the SEC filings, Schering-Plough is “vigorously contesting” Centocor’s attempt to end the distribution deal, and the combined company will continue to do so. Merck officials have said that the arbitration process, which could take nine to 12 months, will not hold up the merger. It is expected to close in the fourth quarter.

“Under the plain reading of (the change-in control) provision, Merck and Schering-Plough believe that completion of the merger will not entitle Centocor to terminate the distribution agreement,” the proxies state. “Due to the uncertainty surrounding the outcome of the arbitration, the parties may choose to settle the dispute under mutually agreeable terms,” which could reduce future revenue to the combined company.

The merger is expected to eliminate about 16,000 jobs at the two companies and bring an estimated annual cost savings of $3.5 billion after 2011. That is not dependent on retaining rights to revenue from Remicade and Simponi, but “the loss of these rights would reduce the amount of sales expected to be generated by the combined company,” the proxies state.

Meanwhile, more than a dozen potential class action suits have been filed against the two companies and their boards of directors, accusing them of breaching their fiduciary duty to stockholders. . . .

Fabulous. That’s the sort of perspective that has been far-too-long missing from financial reporting of “press events” held by multinational pharmaceutical public-companies.

Amended SEC Merger Filing; Remicade/Simponi Arbitration Risks Disclosed. . . .

Schering-Plough (and Merck) just filed an amended merger proxy with the SEC. The putative date for the respective shareholders’ meetings to approve is listed as August 7, 2009. I’ll have more on that, in a few moments, but here is the latest on the arbitration with Johnson & Johnson (at page 94 of the amended filing):

. . . .The arbitration process involves a number of steps, including the selection of an independent arbitrator, information exchanges and hearings, before a final decision will be reached. The arbitration proceeding is expected to take place over the next 9 to 12 months and could continue after the merger has closed. Schering-Plough and Merck are fully prepared to arbitrate the matter and to vigorously defend Schering-Plough’s rights (and after the proposed merger has closed, the combined company’s rights) under the Distribution Agreement.

Although Schering-Plough and Merck are confident that the arbitrator will determine that Centocor does not have the right to terminate the Distribution Agreement, there is a risk of an unfavorable outcome. If the arbitrator were to conclude that Centocor is permitted to terminate the Distribution Agreement as a result of the merger and Centocor in fact terminates the Distribution Agreement following the merger, the combined company would not be able to distribute Remicade, which generated sales for Schering-Plough of approximately $2.1 billion in 2008, and would not have the right to commercialize and distribute golimumab in the future. In addition, due to the uncertainty surrounding the outcome of the arbitration, the parties may choose to settle the dispute under mutually agreeable terms but any agreement reached with Centocor to resolve the dispute under the Distribution Agreement may result in the terms of the Distribution Agreement being modified in a manner that may reduce the benefits of the Distribution Agreement to the combined company.

However, in spite of these factors:

▲ Any change or termination of the Distribution Agreement with Centocor is excluded by the merger agreement from the definition of “material adverse effect” both with respect to Merck and Schering-Plough and is excluded from the definition of “material adverse effect” in the credit agreements for the credit facilities entered into in connection with financing the merger.

▲ The estimated annual cost savings of $3.5 billion expected to be realized from the transaction annually after 2011 is not dependent on the retention of the rights to distribute Remicade and golimumab, although the loss of these rights would reduce the amount of sales expected to be generated by the combined company.

▲ The anticipated continued payment by the combined company of the current Merck dividend of $1.52 per share annually is not conditioned on the retention of the rights to distribute Remicade and golimumab. . . .

I, like Zack’s equity research service before me, am highly skeptical about the Sch-Merck $1.52 EPS guidance, should Schering-Plough (then, new Merck) lose the arbitration, outright. More soon, but perhaps most importantly, it strikes me that this setting an aggressive date to approve the merger is designed to push the various anti-trust regulators to move quickly. In the U.S., that strategy more than occasionally pays some dividends. In the EU it may (and has, on other, albeit smaller deals) caused a “backlash” — with the regulators asking for more and more detail.

We’ll see.

More “Interesting” Vytorin/ENHANCE Allegations — Over on CafePharma, This Past Week. . . .

More new potential litigation fodder, on CafePharma, related to Carrie Cox, Vytorin and ENHANCE results delays, being discussed there, and elsewhere — including over at Derek Lowe’s Corante, lately — to wit:

In some ways this seems to eerily echo the suspected “ruse” we sniffed out two weeks ago, over at CafePharma (but concerning TRA, that time).

At another level, though — if there were time-frames associated with the comments, they would not be wildly-different than those found attached to the In re Schering-Plough ENHANCE Securities Litigation (MDL 1937 Original Case No. 08-397). Click the image below, to enlarge it:

“Carrie” is obviously Ms. Smith-Cox; “Enrico” is — of course — Dr. “Tell him to F* off” Veltri. And, all of that was allegedly prior to these ENHANCE would-be shenanigans:

In any event, I guess the most-recent CafePharma postings differ (from the earlier ones) in at least one other material way — they are post hoc, and the statements in the ENHANCE putative class action were made in some cases prior to, and in others, essentially contemporaneously, in public, at CafePharma, during Ms. Cox’s various sales of securities. And those statements preceded Schering-Plough’s “official publication” of the ENHANCE results — by at least seven months.

Today, 08:45 AM
Anonymous

Re: About These Meeting Recollections, Now Two People Have. . . .

. . . .This was in reply to a post: “. . . .I sat in a meeting listening to Enrico tell Carrie about the challenges for Vytorin. She is guilty. . . .”

Wait — of what relevance is this, really? It offers us no time frame. . . .

If this was Spring/Summer of 2007, that would make these meeting recollections very interesting. If it was Spring of 2008 — Not. So. Much.

What would make these statements at least arguably relevant — and possibly admissible as evidence (a la CWs 1 through 6 in the federal ENHANCE/Vytorin putative class action suits) — would be if these two could say — within a few weeks, on either side — WHEN the meeting(s) in question, with Veltri and Cox in attendance, took place. . . .