flipper44, thx much for this info, your DD is always on point. I would like to just add a few comments after looking into Merck's plans a little:
- Merck apparently announced an expansion of capacity in 2020 with new footprint in N.C., 4 yrs is the min for such an undertaking and a 5th or even a 6th yr is not unreasonable depending upon the scale and complexity of the facility given today's state of regulations manufacturers deal with, not to mention the covid thing for a couple of yrs. If alternatives exist a market can change in a few yrs and demand can fall, which sometimes is what a company wants if they don't see satisfactory ROI but yet want to supply the market until alternatives are approved. I would say Merck allocated capital elsewhere in that time frame, probaly primarily to capacity for Keytruda (I am making some assumptions of course).
- Once Merck got to the point of increasing investment after land, building and then equipment it is in their best interest to move the project along as rapidly as possible as they have then made quite a large investment and that money is not earning until site startup.
- From what I see the timing of Merck's capacity expansion may work well with the resumption of Direct development, though it is unclear if there was a role played by the BCG shortage in the past Direct development or if NWBO just could not fund it after the manipulators crushed the share price, I suspect more the latter and I would personally not connect Citadel to Merck in company strategic planning to this degree. I have accepted given what I have seen in recent yrs that the FDA has become corrupted from what I had experienced in decades past but I would not believe that deep conspiracy exists with large shareholders regarding strategic market maneuvering such as a patient critical ingredient drug shortage.
- What I can say is that BP's have less wiggle room than they used to when investing in product capacity, particularly of what they consider non-strategic investment. It used to be BP's could and would go to more extremes to ensure supply of patient critical drugs, even inactive ingredients, but today there is more restraint due to the size of the $ sales base they are trying to grow, which directs their capital more stringently.
- Back around 2000 when Pfizer bought Warner Lambert (with Lipitor) for about $90B, it became obvious that to maintain a new sales level of about $50B annually would take much smarter and focused R&D and acquisition efforts, which have still not materialized as BP's today struggle to maintain large sales bases when development time frames for more complex disease states expand.
- I had running debates with commercial folks where I once worked in a BP that their strategy to walk away from great products when patents expired was not correct if they wanted to maintain greater sales volumes to benefit both operations and market presence but that was not the preferred approach as they argued it diluted the investment community profit margin expectations for the industry and no BP wanted to be the first to move away from that profit level. Today with biologicals and more complex products BP's are working to lengthen product lifecycles in various ways including just keeping on as a supplier post patent protection in more cases.
- I say all this because it appears Merck is expanding BCG capacity, may have responded late, hard to tell the market factors involved regarding product forecasts and alternatives which may have appeared at the time, and who knows the new quantities involved, whether there will be sufficient product to support Direct launches which may occur in a few short yrs and may require add'l site expansions to support. It may have been the tripling in BCG price that helped justify the capacity investment. But, it is also possible that Merck has followed closely the DCVax story and saw a failsafe investment in BCG by 2020, interesting timing given the top line data reveal by NWBO.
- It is normal for manufacturing companies to research and develop alternatives to key ingredient and sometimes secondary ingredient supply chains even at great expense if the supply cannot be locked up as relatively secure over a reasonable time frame sufficient to find and develop an alternative. There are regular risk analyses performed on all needed ingredients as you would expect. In a case as BCG with such a limited supply chain and relatively complex mfg process I would expect NWBO to identify an alternative and progress the development of it as far as it can at least until the supply of BCG can be secured and it appears there is a possibility the demand for BCG via Direct could explode much quicker than Merck will have time to provide if they are waiting for more Direct development and market data, which is likely. You can bet the price of BCG will increase continually but the price is not the main concern here.
- The question I would ask is whether NWBO has an alternative ready to go since Direct development is close to resuming. Their reporting is quite positive about this and they will need the leverage of an alternative either to utilize in product or in supply discussions with Merck, or even in strategic partnership discussions with Merck if they are in the future, probably not but who knows.
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