The Goldman Transcript | J&J Arbitration Outcomes Hints, From Ken Frazier

More — of Ken Frazier rather broadly hinting settlement — at the Goldman conference, this past week — under Jami Rubin’s relentless questioning:

. . . .Jami Rubin | Goldman Sachs | Analyst
Ken, you said in relation to the J&J arbitration that cooler heads will prevail. This has been dragging on a lot longer I think than most people had anticipated [but to be pretty] straightforward resolution. Can you walk us through your current thinking, where we are in terms of the process, any color at all around timing would be very helpful.

Ken Frazier | Merck & Co. | President and CEO

So the hearing is finished now. The final arguments have been made. I can’t add a lot to it other than the fact that the case is decisional now and I can’t comment on what may or may not happen between the parties. But we continue to be very confident that the transaction that we used in order to effectuate this merger does not violate the provisions of the contract including specifically the change in control provisions.

Jami Rubin | Goldman Sachs | Analyst

Is it true that most arbitration cases result in settlements?

Ken Frazier | Merck & Co. | President and CEO

Well I think if you look historically, there’s pretty much good empirical data that suggest that most large commercial disputes are resolved without either a judicial determination or an arbitration decision. But that doesn’t mean that I can comment about this particular case, but it’s true that historically most cases have settled. . . .

Jami Rubin | Goldman Sachs | Analyst

You know, as the new CEO, Ken, you are — the Company is facing two very important binary events. I mean, arbitration will go which way it ever — where it goes. You don’t have much control over that. It is what it is. . . .

We hope it results favorably to Merck, but it’s really out of your hands. . . .

Ken Frazier | Merck & Co. | President and CEO

So I think one of the benefits of being a company that is large and with as broad a portfolio as we now have is that we’re not dependent on any one product, we’re not dependent on any one geography for example. We have lots of opportunities.

And I think the way that you plan for it is to actually manage your whole portfolio and to ensure that you have a reasonably balanced set of opportunities and risks. As I said, the nature of this business has always been that at the end of the day, if you’re going to be in the business of innovation — and the standards are higher now — there’s a certain amount of risk associated with that.

But at the same time, we are a very strong company. We take really careful looks at our internal portfolio. We look at the outside world. We’re always scanning the outside world for value creating business development opportunities. So I would just answer your question by saying those are big binary events and there’s a certain amount of risk associated with them. But we actually have a balanced portfolio of opportunities and our job as a senior management team is to plan for those things and be in a position to actually execute as much as we can on the downside and as much as we can on the upside. . . .

I am now of the rather firm opinion that this dialogue is more than arguably material new information on the J&J arbitration — and it ought to be filed, by Monday night, with the SEC — on a Form 8-K, by Whitehouse Station. If Merck doesn’t, it will be open to criticisms about selective disclosures. I think this exchange may explain, in large measure, the nearly 5 percent increase in Merck’s NYSE price, in the days since Wednesday.

I think Ken Frazier ought to make this more-widely available to the investing public, by a formal SEC Form 8-K filing.


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