Just one of Many Securities Fraud Lawsuits Filed Against Schering-Plough

As of this morning, 01.30.08 (according to Merck's CEO), there are now over 50 lawsuits pending, on this matter. Here are a few paragraphs from the recently-filed federal secruities fraud complaint in Manson v. Schering Plough, et al., 2:08-cv-00397-DMC-MF, US Dist. Ct., NJ (Filed January 18, 2008) -- the plaintiff seeks certification of the litigation, as a federal securities law class action:

". . . .Paragraph 58.

On January 3, 2008, defendant Hassan and Schering-Plough presented at the Morgan Stanley Pharmaceutical CEOs Unplugged Conference, that was also broadcast live. . . . when announcing Hassan and the Company’s participation, defendants also published a release that stated, in part, the following:

". . . .Schering-Plough to Webcast
Presentation at Morgan Stanley
Pharmaceutical CEOs Unplugged Conference

KENILWORTH, N.J., Dec. 27 /PRNewswire-FirstCall/ -- Schering-Plough Corporation (NYSE: SGP) will provide a live audio webcast of an informal presentation by Fred Hassan, chairman and chief executive officer, followed by a question-and-answer session, at the Morgan Stanley Pharmaceutical CEOs Unplugged Conference on Jan. 3, 2008, at approximately 8:45 a.m. (ET). Morgan Stanley hosts will moderate the informal “unplugged” presentation.

Included in Mr. Hassan’s comments will be Schering-Plough’s strategic evolution and the acquisition of Organon BioSciences N.V. (OBS). During the conference he may confirm that the company is still targeting the same accretion and synergy targets mentioned when the OBS acquisition was announced March 12, 2007, specifically that the transaction is anticipated to be accretive to Schering-Plough’s earnings per share by about 10 cents in the first full year, excluding purchase accounting adjustments and acquisition-related costs; and Schering-Plough expects to achieve annual synergies of $500 million. It is expected to take three years from the closing to reach this level of synergies.

Hassan may also reaffirm the following items as disclosed in previous Securities and Exchange Commission filings:

o Schering-Plough anticipates that sales from VYTORIN and ZETIA will continue to grow in the fourth quarter of 2007 and in 2008;

o Schering-Plough is confident in its key products; however, these products face growing competition.

o Schering-Plough will invest in its key brands to sustain their leadership position. . . .";

Paragraph 59.

The statements made by defendants at the Merrill Lynch conference, at the Credit Suisse conference and at the Morgan Stanley conference as well as those statements contained in Schering-Plough’s October 22, 2007 release and and/or contained in the 3Q:07 Form 10-Q, referenced above, were each materially false and misleading when made and were known by defendants to be false at that time. . . ."

Even good times, it is never wise to engage in free-wheeling talk with analysts this close to year end earnings announcements. It just leaves management open to exactly these sorts of charges, if "things turn out differently" than expected.

Note especially that Mr. Hassan made these remarks, and attended this Morgan Stanley conference -- while by SGP's own timeline ["Tom Koestler, EVP, learned of Enhance results on January 7, 2008 at 2:00 p.m."] -- only a few days before he learned of the Enhance results. Wouldn't have made more sense to get the Enhance results, in hand, BEFORE doing a January 3, 2008 "Unplugged" conference? It would sure seem so, now. On January 3, 2008, SGP closed at $26.67 a share.

Interesting Admission by Schering-Plough in SEC-Filed Timeline. . . .

This morning, before market open [on January 25, 2008], Schering Plough (SGP) and Merck (MRK) jointly-released what purports to be a defense of the handling of the data from the ENHANCE study. The press release includes a time-line of what happened, and when.

This one item, from the timeline, is fascinating:

January 2007

"Hiring of two independent contractors (a project manager and a data manager) to work with the laboratory on data management issues. Advice also sought from an independent consultant, who reviews the data and issues a report on January 26. Report considers data quality similar to that in other IMT trials, but acknowledges desire to improve data quality and recommends a number of ways to improve the data and reduce “missingness.” This consultant will serve as one of the expert panelists in November 2007. Schering-Plough begins the process of “querying” outlier data based on objectively defined criteria. . . ."

Here is the link:

http://biz.yahoo.com/bw/080125/200801250...

Read that last sentence. Schering-Plough "begins process of querying outlier data." That's January 2007. So, people at Schering-Plough knew about at least PARTS of the data in January of last year. Sales of stock by officers and directors, including Cox (and the GC); then massive offerings of stock, and preferred, and debt, took place in those next seven months.

Yet no mention of the problems with this study. No mention of "outlier data". This study involved a product generating between 50 percent and 66 percent of SGP's overall profits.

SGP also made no mention that it was delaying the release of the results at scientific conferences, for this study, due to problems with the data, in any of its prospectuses.

No mention? No mention? And, one more time. . . no mention???

~~~~~~~~~~~

[Later in the day, on January 25, 2008:]

On the August 9, 2007 -- SGP Common Stock Offering

From the Schering-Plough press release on that day:

Schering-Plough Corporation Prices Public Offering of Common Shares and 6.00% Mandatory Convertible Preferred Stock


KENILWORTH, N.J., Aug. 9 /PRNewswire-FirstCall/ -- Schering-Plough Corporation (NYSE: SGP) announced today that it priced its registered public offering of 50,000,000 common shares at $27.50 per share. The underwriters have an option to purchase up to an additional 7,500,000 common shares from Schering-Plough.

Schering-Plough also announced that it has concurrently priced its registered public offering of 10,000,000 shares of its 6.00% mandatory convertible preferred stock at $250 per share. The shares of 6.00% mandatory convertible preferred stock have a liquidation preference of $250 per share, for an aggregate liquidation value of $2.5 billion. The preferred stock will pay dividends at a rate of 6.00 percent per annum, payable quarterly. The first dividend payment date will be November 15, 2007. Unless earlier converted, the 6.00% mandatory convertible preferred stock will automatically convert on August 13, 2010, into between approximately 74,206,000 and 90,909,000 common shares, assuming no exercise of the underwriters' option to purchase additional shares. The conversion rate will be subject to anti- dilution adjustments in certain circumstances. . . .

These offerings will generate aggregate net proceeds of approximately $3.8 billion, assuming no exercise of the underwriters' option to purchase additional shares. The offerings are expected to close on August 15, 2007. . . .

The offerings are being made under a shelf registration statement filed with the Securities and Exchange Commission on August 2, 2007. This announcement is neither an offer to sell nor a solicitation of an offer to buy any securities and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale would be unlawful. Any offers of the common shares and shares of the mandatory convertible preferred stock will be made exclusively by means of a prospectus and prospectus supplement. . . ."

These securities were underwritten, on a firm commitment basis, by Goldman, Sachs & Co., Banc of America Securities LLC, Bear, Stearns & Co. Inc., Citi, Morgan Stanley, BNP PARIBAS, Credit Suisse Securities (USA) LLC, J.P. Morgan Securities Inc., Daiwa Securities America Inc., Santander Investment, Utendahl Capital Partners, L.P. and The Williams Capital Group, L.P.

I suspect, at $27.50 per share just five months ago, there are some unhappy clients of these firms -- to say nothing of the firms, themselves.

Cheers!

Fred Hassan "promised" to "buy" $2 million worth of Schering stock today. Yawn.

Okay -- a day or so after the ENHANCE story broke, the CEO said he would buy another $2 million worth of Schering Plough common stock, with his personal funds -- but only after more current Schering information was made public (per the company lawyers). He specifically mentioned the Year-End 2007 results, and the ACC Meeting on March 30, 2008 as the events the lawyers wanted him to "wait" for.

Now, I ask you -- gentle reader -- to consider this: Is it Fred's money, at all?

FRED'S MONEY??

Well, this is getting to be rather interesting. Does anyone here know what Fred Hassan's taget non-equity (CASH) bonus is for the Year 2007 (payable in April 2008 -- See page 39)?

Anyone -- anyone. . . A N Y O N E? [Imagine Ben Stein, in "Ferris Bueller's Day Off". . .]

That's RIGHT -- if Schering is deemed, by the Board, to have met its targets for 2007, Mr. Hassan's non-equity (cash) incentive payment will be. . .

Wait for it. . .

$2,087,500.

Yep -- there are Hassan's "personal funds" -- $2 Million, folks. Shareholders ought to ask about this incentive, on the 2007 Earnings call, and the "coincidence" that Mr. Hassan intends to buy almost-exactly that amount of stock. To be clear, the Compensation Committee of the Schering Board of Directors probably has not yet approved the award, so the time to write them is. . . now.

Now, consider this: We do know the ENHANCE study was completed in April 2006. Were the results made public promptly thereafter, then -- as we are now learning -- it would have been unlikely that Schering would have been able to make its targets for 2007. If Schering misses on profitability in 2007, then Hassan does not get the above $2 million cash incentive.

Similarly, it seems no stretch to presume that, for 2006, he would NOT have received a 200 percent pay-out, for "over-achievment" of his objectives, as he did, if the pill-taking world had known that generics do the same job, far more cheaply [the upshot of this study]. So, the money he now "bets" with is, in truth, "the house's" money. Your money -- as a shareholder, you are "the house".

Point Two: All of you speculators/shareholders who are buying today, on Fred's "show of confidence" are taking a pretty big risk. Fred has said he will buy $2 Million worth of stock, in the future AT WHATEVER PRICE THEN PREVAILS IN THE MARKET. [He did not say he would buy XXX,XXX number of actual shares -- in that case, his "promise" would reflect a firm-belief that, TODAY, the shares are undervalued].

And so, he is playing a game of "Texas no-peeky" with you all, but all the while. . . he peeks at your bets, and his cards. He holds a bunch of cards as an insider, that you'll only see months, or years, later. How so, you might say?

Well, when earnings for 2007 are announced, he shows some of his "peeky" cards, and then, when the ENHANCE study results have been fully-vetted at the ACC scientific conference at the end of March 2008, he shows more of his cards -- and ONLY THEN, or at some point after that time, will he actually buy-in. All along, he'll see the trades you all make, based on his "bet/bluff". So, he'll actually buy on complete information -- while everyone buying today has nothing near the access to information he possesses even now, as he makes this "bet".

Finally, his "bet" is no binding contract, for if it were, he'd have to register it with the SEC as a "put option" in favor of the SGP shareholders [or, the Board of Directors -- in fact, why isn't this a put? -- but, I digress], as of this moment. So this is great PR sop for the unsophisticated, but for the rest of us. . . . it is slightly worse than yawn-inducing. He is gaming you. But so, so, many are drinking his Kool-Aid.

Ah, well -- can't say I didn't try to help out.

Sunshine is, after-all, the best anti-septic.

Periods of Inefficiency in the SGP v. MRK NYSE Markets

Periods A and B, below, evince non-proportionality -- differing news affects the companies in differing ways. [Chart derived from BigCharts.com -- click to enlarge.]



Please explain.

Who is. . . . the "Condor"?

He is the Condor. It is a very fine movie -- Robert Redford and Faye Dunaway -- directed by Sidney Pollack; in a Dino De Laurentis picture (from the novel Six Days of the Condor, by James Grady). . . . Just click on the video, above -- or, better yet, go rent the movie. You won't regret it. I promise.

"Boy! -- What is it with you people? Do you think not getting caught in a lie, is the same thing as telling the TRUTH?. . . Do you?"

That one line, from the closing [at 2:20, on the counter], above, sums up my whole mission, here.

Black Background Image Bank

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And here:

Carrie Cox -- Rough Draft Image

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Wow -- that's bad. Be better soon.

Raw Material -- First-Draft Hans Becherer Parody Images

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Here is some very raw material -- all Creative Commons licensed -- or public domain.

Archived US House Committee Hearings Video Feeds

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Public Domain Commentary/Parody Image -- Bee!

"What bee?! I see no [Nasonex] bee":



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