What FDA Letters? Merck Tries To Bury Bad News
6 CommentsBy Ed Silverman // November 10th, 2011 // 8:09 am
Generally, drugmakers will issue a press release after receiving a so-called Complete Response Letter from the FDA. Simply put, these missives indicate that the agency has declined to approve a drug and generally suggest what is needed to make approval happen. This is not the sort of news any drugmaker wishes to tout, but disclosure is, nonetheless, required.
Merck, however, took the unusual step of not issuing a press release for a pair of CRLs received over the past week. One was dated Nov. 4 and was sent in regards to an oral contraceptive with the catchy name of NOMAC/E2. The other was dated Nov. 7 and was about a glaucoma med called tafluprost, which is known commercially as Saflutan.
How do we know? The drugmaker two days ago filed its latest quarterly earnings report with the US Securities and Exchange Commission and mentioned the CRLs, ever so briefly, on page 54 (see here). Not the most noticeable placement. In other words, Merck was trying to ensure the disappointing news remained off the collective radar screen, at least for as long as possible.
Of course, all sorts of people comb through SEC filings and the CRLs would have been noticed sooner than later. But for a brief moment, Merck was able to bury the disappointments. And given that the drugmaker today holds its annual R&D meeting for Wall Streeters, there was added impetus to hope that the CRLs would not become another talking point for R&D setbacks.
Hence, the decision not to issue press releases, which are the equivalent of using a megaphone. Now, Merck may well argue that the usual SEC requirements were fulfilled. After all, the CRLs were disclosed and the disclosure was done in a way that was accessible to everyone at the same time - see page 54. And the SEC filing occurred just a few days after each CRL was received.
To some, this may seem like much ado about nothing. After all, anyone who is truly interested in learning about the latest doings at Merck will read through an SEC filing anyway and, presumably, find mention of the CRLs. However, they would not have learned anything else, because Merck did not say what prompted the FDA to issue a thumbs down.
A Merck spokesman would only say that “we believe it was an appropriate means of disclosure.” But this approach only invites a plethora of interested folks - investors of all stripes, rival drugmakers, information traffickers, journalists, who are we forgetting? - to more closely scrutinize their next SEC filing for yet another buried CRL. The drugmaker has now created the impression that disappointing news will not be disclosed in a way that people have come to expect.
Failing to issue press releases for a pair of CRLs, however irregular, may not rise to the same level as not disclosing cardiovascular risks for its Vioxx painkiller on a timely basis. But Merck ought to know by now that failing to disclose disappointments in the usual manner can raise an antenna or two. Trust has to be earned. One way to do that is to avoid causing people to question motives. But what do you think?
Should Merck Have Issued Press Releases For The CRLs?
- Yes (83%, 127 Votes)
- No (18%, 27 Votes)
Total Voters: 153
Loading ...shock pic thx to ogimogi on flickr
original industry insider
No skullduggery here IMO. This is the time of the year when the drug companies are putting together their 2012 guidances for the financial analysts. I suspect that the rejections probably threw their projections off, and that when they issue their forward looking guidance for 2012 everything will be made public, or at least some time before the next dog and pony show for Wall St.
Condor
Three points, OII — one, today is that dog and pony show, for Merck. It is being webcast, and the full slide decks are here, at SEC right now, and so far, only a quick (largely dismissive) mention by CEO Frazier. No specifics, as to the reasonings that led the FDA to demur, twice, in a few weeks.
Two, these were pretty clearly immaterial programs — still, the common practice is to press release complete response letters from FDA, even on immaterial projects. Why?
Because a company’s trend line, on non-approvals and follow-up data requests, is important. One should hope that this doesn’t foretell a more skeptical eye — at FDA — as to Whitehouse Station’s submissions, more generally.
Three — Frazier announced a 10 bump to the dividend — thus, on Wall Street, at least — all is forgotten, as the NYSE-price of MRK gaps up. Investors will — from now on — reap a fatter return each quarter, in cash (never mind that it is a doubly-taxed cash stream, of course).
Great perspective here, Ed.
Namaste
original industry insider
Thanks, Condor. I briefly looked at the slide deck. If I were a financial analyst I would have nodded off or walked out. For me they could have done it in one slide: EPS for 2012. I didn’t see it, maybe I missed it. This is in keeping wirth Merck’s longstanding reputation for keeping the investment community in the dark or underprojecting, so that if they have a modestly successful year they can go crazy over how they “beat” analysts expectations. Getting old.
Cody T.
Between this and Merck’s simvastatin/ rhabodmyolysis/myopathy data from AtoZ and SEARCH….what can I say???
….Merck has a LOT to hide these days
original industry insider
Best news of the day for my stock portfolio:
http://www.bloomberg.com/news/2011-11-10/merck-gains-as-drugmaker-boosts-quarterly-payout-for-first-time-since-2004.html
pharma gal
More of the same from Merck, hide and obfuscate and count on Wall Street to have short term focus, while the long term direction of the company is downtrending. I guess it’s OK for day traers who are in and out by sundown. But hard working Americans will continue to lose in the long run with this company as they have lost over the past 10 years. And by the way how do you get a CRL on a birth control pill? How many BCs have entered the US market place, and Merck can’t get an old technology through the FDA? The emperor has no clothes.