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Johnson & Johnson (JNJ) is trying to regain sole marketing rights to Remicade, its lucrative anti-TNF treatment for arthritis and psoriasis, because Schering Plough (SGP)—which has most of the marketing rights to the drug outside of the US—is being acquired by Merck. JNJ is seeking arbitration to determine whether or not Centocor, its subsidiary that manufactures Remicade and Simponi, can terminate a marketing agreement for the two drugs—based on terms stipulated in the original contract —if there is a “change of control” at SGP.

As you may recall, Merck was acutely aware of the terms of marketing agreement before it decided to purchase SGP and cleverly engineered the acquisition as a reverse merger— to prevent triggering provisions that could return Schering’s marketing rights for Remicade and Simponi to JNJ if their were leadership changes or a change of control at SGP. JNJ’s announcement contesting wasn’t unexpected after the Merck-Schering Plough deal was announced early last winter—sales of Remicade outside of the US topped $2.0 billion in last year. Simponi, Remicade’s highly touted successor (which recently received FDA approval), is also expected to reach blockbuster status after it reaches the market. 

The Merck-Schering deal left JNJ with few alternative or choices. The company could have counter offered to purchase SGP in its entirety or simply, as it did, invoke terms of the original agreement that would terminate SGP’s marketing rights if there was a “change of control” at the company. JNJ rightfully believes that a change of control will occur when Merck acquires SGP. According to a JNJ spokesperson “As its public statements make clear Merck is acquiring Schering Plough. The acquisition constitutes a change of control and trigger’s Centocor’s right to terminate.” It will be interesting to see how an arbitrator rules in the case.

While the loss of Remicade and Simponi isn’t likely to jeopardize the Merck-Schering Plough deal (according to Merck executives), it may affect the financial terms and overall benefit or upside of the acquisition. The expected completion of the deal is scheduled for the fourth quarter of this year.

Until next time...

Good Luck and Good Job Hunting!!!!

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The New York Times reported today that Genentech’s blockbuster cancer treatment, Avastin, failed to show a significant effect on preventing the recurrence of colon cancer, limiting its utility as an adjunct treatment to treat primary colorectal cancer. While Avastin is already a best-selling cancer treatment, success in this closely watched and highly visible clinical trial could have paved the way to a new uses of the drug, potentially increasing sales by billions of dollars a year.

Avastin had sales of $2.7 billion in the United States alone last year. But it is currently approved only for late-stage colon, breast and lung cancers. For those indications, patient’s lives have been prolonged for up to a few months. The new trial was designed to determine whether or not Avastin could be used earlier in the course of the disease, right after surgery to remove the tumor. The hope of such so-called adjuvant therapy is to prevent the cancer from coming back at all, effectively curing the patient.

While the Avastin failure will have little or no effect on Genentech’s financial outlook, it does call into question whether or not Roche paid too much last month to buy the 44 percent of Genentech it did not already own. Roche has long insisted that its desire to own all of Genentech did not hinge on the results of this trial. And yet, the trial appeared to play a major role in Roche’s months-long negotiations with Genentech.  It appeared that Roche, which had started those discussions last summer, wanted to complete the deal before results of the Avastin trial were announced — on the assumption that a successful trial would have sent Genentech’s stock soaring, possibly putting the takeover price it offered out of reach.  A failed trial, on the other hand, could have pushed down the value of Genentech’s stock. So it now looks as if Roche could have paid less had the results of the Avastin trial come out before it completed the deal.

Art Levinson, Genentech’s former CEO who played hardball with Roche over the course of negotiations, needs to be recognized for his outstanding business acumen. He and other Genentech executives convinced Roche that Avastin sales could quadruple, to $10 billion, by 2015 if the drug could be used for early-stage colon, lung and breast cancers. This possibility induced Roche to raise its bid for Genentech’s outstanding shares from $86.50 to $95 per share. Although Dr. Levinson wasn’t able to fend off Roche’s takeover and is no longer Genetech's CEO, he is likely “laughing all the way to the bank” as the expression goes. And, who said that PhDs aren’t any good at business?

Roche shares were down more than 10 percent on Wednesday, closing at $29.54.

Until next time...

Good Luck and Good Job Hunting!!!!!

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Pfizer's board of directors voted on Sunday evening  to acquire Wyeth for $65 billion.  While this may help to assuage some of Pfizer's short term financial problems, like the loss of  Lipitor in 2011,the deal will not help the combined company in the long run. 

The deal will undoubtedly lead to massive layoffs at both Pfizer and Wyeth--a time when our economy cannot afford much more job loss.  Further, it will diminish competition, reduce the need for more scientists and ultimately diminish America's standing in the life sciences. 

If I were a Pfizer or Wyeth employee the first thing that I would do on Monday morning would be: update my resume, contact as many  recruiters as I can and find a new job before the layoffs begin. I think the era of severance packages is over!

Until next time... 

Good Luck and Good Job Hunting!!!

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GlaxoSmithKline announced late last fall that it would acquire California-based Genelabs for $57 million in cash. The deal closed yesterday and the exodus began today.

According to sources at the company, Genelabs employees will be offered a week of severance pay for each year of service. Genelabs executives and employees have been given pink slips.

By purchasing Genelabs, GSK establishes a presence on the West Coast. Also, it will strengthen its effort to develop therapies against the hepatitis C virus. Genelabs will become part of Glaxo’s drug discovery organization and its hepatitis C virus program.

Luckily for former Genelabs employees, California biotechnology companies are still hiring.

Until next time…

Good Luck and Good Job Hunting!!!!!! 

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As reported yesterday by the Pharmalot Blog and verified by the New York Times today, the undisclosed “white knight” drug maker that may help ImClone ward off a hostile takeover bid by Bristol-Myers Squibb (BMS) will make a decision by Wednesday about whether or not it wants to make an offer for the biotech company. 

As you may recall, Carl Icahn, ImClone’s Chairman, announced about a month ago that an unnamed drug company may be willing to offer $70 per share for ImClone stock. BMS responded to the announcement by raising its initial offer from $60 to $62.50 per share for outstanding shares of ImClone’s stock. This feeble counteroffer did nothing but increase the hostilities between ImClone and BMS. BMS currently markets Erbitux ImClone’s blockbuster colon cancer treatment. Based on the tenor of this deal, it is becoming increasingly apparent that ImClone and BMS are not “close” even though they are business partners.

Mr. Icahn, in a brilliant display of his business acumen, has been able to prevent industry insiders from divining the identity of the mysterious suitor (if there is one at all). Conventional wisdom suggests that it is likely to be one of the larger drug companies that would like increase its market share in the biotechnology sector.  The good news is that we may only have to wait another 24 hours before this “cliffhanger” of a deal is resolved (ho-hum). Don’t be surprised that, in the end, BMS may wind up paying more than $70 per share to purchase ImClone.

Until next time…

Good Luck and Good Job Hunting

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 Previously, on the Bristol-Myers Squibb/ImClone Let’s Make a Deal Show. BMS offered $60 per share for the outstanding shares of ImClone that it doesn’t already own. As expected, Carl Icahn, ImClones’s Chairman and former corporate raider, summarily rejected BMS’ offer as insulting and an attempt by BMS to undervalue ImClone’s stock. Then, after a month of silence between the two parties, Mr Icahn announced that an undisclosed pharmaceutical suitor had made a better offer to buy ImClone. Today, about three weeks after Mr Icahn disclosed the information about his mysterious stranger, BMS (as expected) grudgingly raised its offer from $60 to $62 per share. The mysterious stranger seems to be out of the mix now.

Conventional wisdom (and word on the street) suggests that ImClone’s stock is worth about $70-$75 per share and that Carl (and the ImClone board of directors) will not sell the company for anything less. Today’s exchange between BMS and ImClone prompted a Wall Street analyst who has been closely following the twists and turns of the deal to write “we view Bristol’s increased bid and attempt to remove the company’s board as futile. The premium over the prior $60 offer is insufficient, in our view, to woo the larger ImClone stock holders to join it in revolt against Mr. Icahn and his allies on the board. The net result of Bristol’s efforts will amount to little more than yet another exchange of testy letters between the two parties.” And, in fact, Jim Cornelius, BMS’s CEO took the opportunity to do just 

It seems to me that whether or not a deal is reached depends more on who wins the pissing match between Mr Cornelius and Mr. Icahn rather than what is in the best interest of the shareholders of both companies. C’mon guys, we are currently in the midst of the worst economic meltdown in the history of the US —do the right thing and consummate the deal already!

Tune in next time for latest installment of the BMS/ImClone Let’s Make a Deal Show.

Until next time….

Good Luck and Good Job Hunting!!!!!!

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The Wall Street Journal reported late Wednesday that after weeks of exploring a possible sale to a larger pharmaceutical concern, Biogen Idec Inc. reported it had received no serious offers, prompting a 27% drop in the company's stock price.

In after-hours trading, Biogen's stock plunged $20.38 to $55.50, erasing $6 billion in market value. Before the announcement, the shares ended regular trading on the Nasdaq Stock Market at $75.88, up 49 cents according to the journal. Within a few minutes of the announcement, Biogen lost nine months of gains fueled mainly by buyout rumors. Acquisition candidates may have been dissuaded by Biogen's high stock price and market valuation -- its market value had grown to $25 billion after the company announced its intention to sell a couple of months ago.

In a previous post, I suggested that it would be unlikely that Biogen Idec would be able to induce a pharmaceutical suitor to take the “bait”. There simply was “too much hair” on the deal to warrant serious consideration by pharmaceutical suitors.

This will likely to be a serious and damaging blow to the Company. I am not sure what the future holds for Biogen Idec but I suspect it is not a bright one—whatever the outcome. Don’t be surprised if words like reorganization, strategic reallocation of resources or creative staffing solutions begin to appear in the media.  The company needs to sweeten the deal in order to get a real bite!

Until next time…

Good Luck and Good Job Hunting (try Biogen/Idec, all of the”smart” people are dusting off their resumes)!!!!!

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