Replies to post #76381 on Biotech Values

[DewDiligence]

I think David Moskowitz of Caris & Co. is reading this board—you be the judge.

From #msg-37212948:

JNJ will almost certainly be able to extract some value by challenging the “reverse merger” structure of the MRK-SGP deal, which is an attempt by MRK and SGP to circumvent the change-of-control provisions in SGP’s agreement with JNJ covering the ex-US commercial rights to Remicade and Simponi. I base this assertion on the following:

• The reverse merger is a sham insofar as MRK (not SGP) is clearly the surviving entity in terms of management and BoD composition. Thus, JNJ has a strong case from a legal standpoint, IMO.

• From a practical standpoint, it makes more sense for MRK to give JNJ a modest percentage of SGP’s ex-US rights to Remicade and Simponi (or a lump-sum payment in lieu of such a %) rather than spend a lot of money on legal fees.

• All three companies declined to comment on this matter during their 1Q09 CC’s.

From David Moskowitz’s Caris & Co. report issued later the same day:

http://online.barrons.com/article/SB124035321752840723.html

Schering-Plough did not talk about what will happen to Remicade/Simponi should the Schering-Plough/Merck deal close. Neither Johnson & Johnson nor Merck did so on their earnings calls, either.

We continue to believe that Johnson & Johnson is unlikely to simply allow the "reverse merger" [note the quotation marks!] to pass without getting its pound of flesh, and we await an announcement on how this is going to play out. We believe Johnson & Johnson is in a position of strength in this regard.