Project Solar: Merck & Schering-Plough’s Reverse Merger
Sundays resonate to the energy of the Sun, and on March 8, 2009 Project Solar was born. With the Moon in Leo, the sign of the Sun, the two chief executives behind the project were ready to emerge into the spotlight.
The Sun in Pisces opposed Saturn that day, representing that for technical purposes, Saturn and its subsidiary Blue would be acquiring Mercury and its subsidiary, Purple. Mercury had just moved into Pisces which was convenient since Pisces and its planetary ruler Neptune rule drugs and chemicals. And Mars conjoined Neptune to ensure the drug deal got done now while the atmosphere is still shrouded in the heavy cloud cover of euphoric delusion.
According to an SEC filing, Project Solar is the code name dubbed by bankers for the merger between Saturn (Schering-Plough/SGP) and Mercury (Merck/MRK). Pisces/Neptune energies excel at the art of illusion. The magician bankers optimistically believe that because Jupiter is conjoining Neptune this year, now is the time for big (Jupiter) pharma (Neptune) consolidation. Jupiter conjoining Neptune represents the blockbuster drug stars of the pharmaceutical industry, most of which relate to cardiovascular (Sun/Leo) health. With Jupiter and Neptune in Aquarius, it was time to come up with something out of the blue to maintain market share. Aquarius and its planetary ruler Uranus relate to trend reversals; hence the idea of a reverse big pharma merger was born.
The problem is that you can’t create reality (Saturn) from illusion (Neptune/Pisces). To approve the deal requires a suspension of disbelief by both companies’ shareholders and government regulators that Schering-Plough is acquiring Merck when Merck will finance the $41.1 billion acquisition, paying Schering shareholders $23.61 per share ($10.50 cash per share and 0.5767 of Merck shares). The merged company will be called Merck, operate out of Merck’s New Jersey headquarters, and consist of a Merck majority Board of Directors. Merck CEO Richard Clark will run the company while Schering CEO Fred Hassan could end up with an exit package worth up to $60 million.
All this extreme engineering was concocted by Merck and Schering in order to avoid triggering a change-of-control provision in Schering’s partnership agreement with Johnson & Johnson (JNJ) that would revert the entire rights for Remicade and another anti-inflammatory drug (golimumab) in the pipeline back to J&J. (Schering owns most of Remicade’s international rights which in 2008 generated $2.1 billion in sales.) Arthritic conditions are ruled by Saturn (bones/joints). No doubt Merck is counting on Saturn (Schering) to provide a pipeline to profit from an aging global population. As Jupiter and Neptune conjoin the Remicade agreement chart’s Venus in late May, it’s hard to imagine that no legal issues will rise over J&J and Schering’s revenue sharing arrangement. Mercury (the planet, not Merck) was retrograde* at the time of the 1998 agreement, increasing the potential for revisions or breaking the contract altogether. Venus in Aries will transit over the agreement chart’s Sun and Mercury retrograde in May, which could represent new financial arrangements or settlements.
Merck and Schering already collaborate on Vytorin, a cholesterol drug combining Merck’s Zocor (simvastatin) and Schering’s Zetia. Sales for Vytorin ($2.4 billion last year) began to decline in early 2008 after the Enhance study revealed Vytorin lowered LDL cholesterol no more than Zocor (available as a generic) did alone. There were even indications that Vytorin might potentially increase arterial plaque. And in multiple study trials comparing Vytorin, the number of cancer deaths was one third higher among participants taking Vytorin.
Transiting Jupiter exactly conjoined Neptune in the chart for Vytorin the day of the Merck/Schering merger agreement, indicating that expanding Vytorin sales while reducing expenses is a big objective of the merger. It also indicates that court challenges could await. Transiting Saturn continues to challenge a key planetary alignment in Vytorin’s chart through the summer. Revenues from Vytorin are likely to continue to decrease and face increased political pressure. As the call for healthcare reform increases, the government is likely to balk at paying for expensive drugs that not only fail to demonstrate a meaningful benefit over cheaper ones, but could also potentially do more harm than good.
Pharmaceutical mega mergers can be a manifestation of the overly optimistic and high expectations of Jupiter conjoining Neptune. Big pharma is going to get extremely imaginative in coming up with grandiose legal maneuvers to extend the patent protection of their blockbuster drugs, even though strategies such as creating combo pills and extended release formulations have failed to generate a big splash.
At the same time that Jupiter and Neptune conjoin in Aquarius, Saturn in Virgo (healthcare) is opposing Uranus (Aquarius’s planetary ruler) in Pisces through mid-2010. Healthcare as a defensive sector play is on the wane as evidence has already surfaced that these big pharma blockbuster drugs to a large degree fall under the category of consumer discretionary spending. Uranus ends its stay in Pisces in 2011. This is the same time when many of big pharma’s blockbuster drugs, such as Lipitor (PFE), Plavix (BMY) and Zyprexa (LLY) lose patent protection. Uranus in Aries (2011-2018) will bring innovation (Uranus) through more mechanical and pioneering methods (Aries). Uranus in Aries will challenge transformational Pluto in Capricorn (2008-2024), creating medical devices so small they can be precisely targeted where treatment is needed.
A far more accurate codename for the Merck-Schering merger would be Project Banker. Banking and finance is ruled by Venus which turned retrograde two days before the March 8 merger agreement. Venus retrograde can indicate that Merck is paying too much to acquire Schering. But that matters little to the banks who view big pharma as one of the few cash cows able to do M&A in the current financial climate. Goldman Sachs (GS), JPMorgan (JPM), and Morgan Stanley (MS) will split up to $146 million in fees for advising Merck and Schering on the merger.
Far from using their TARP money to expand lending and credit to consumers, banks are advising and providing financing for pharmaceutical company mergers. This has a negative economic effect as it contracts research and development thereby reducing innovation, increases unemployment, hurts the biotech sector by reducing their distribution channels, raises drug costs to consumers, and dilutes shareholders earnings and dividends.
In the end all the cost savings and other wonderful things touted by the companies, their bankers, and Wall Street analysts are likely to amount to one giant fairy tale.
*Planets do not really move backwards but appear to from Earth’s vantage point.
Posted 3/13/2009 10:24:00 PM