In 2008, Schering-Plough Employees’ Plan-Participants Saw Depreciation of $150 Million, in Company Stock Values Alone

Schering-Plough just filed (with the SEC) its 2008 Annual Reports on Form 11-K covering its employees’ saving and investment plans (one for employees in Puerto Rico, and one covering the United States employees), tonight. Together, these plans reported just under $150 million in value-declines, for the calendar year 2008 — on Schering-Plough common stock investments held by employees, alone (forgetting about the all the rest of the general market-declines).

Meanwhile, CEO Fred Hassan’s payday/GAIN — on the reverse merger’s effectiveness — could easily top $158 million, for his personal account, alone.

That’s MORE than ALL the employees’ plans unrealized declines of last year, combined.

From the SEC Forms 11-K, then:

. . . .Puerto Rico | Page 12. . . ($1,779,000). . .

United States | Page 13. . . ($149,576,000). . . .

The vast bulk of these declines are now in the accounts of the lowest-paid (and in many cases, soon-to-be laid-off) Schering-Plough employees (and recent ex-employees). . . . But Mr. Hassan will parachute away, safely — on billowing clouds of golden fleece. . . .

A Grin-Break — From the Sunscreen Battle Royale — On a Hot Friday

As most of you know, Schering-Plough (the maker of Coppertone) has sued J&J’s Neutrogena unit (seeking, after depositions, a preliminary injuction — a gambit upon which I personally think Schering-Plough is highly unlikely to prevail), claiming that some of Neutrogena’s advertising for its sunscreens is “false and misleading“. Of course, Neutrogena not only disputes those allegations, but has, just this week, re-asserted that some of Schering’s Coppertone advertising is — itself — both “false and misleading“, under the federal Lanham Act, as well as local Delaware law (the suit is pending in the federal District Courthouse in Delaware).

What’s good for the goose, is better for the gander, it would seem, eh? In any event, at about page 13, of the 19 page Neutrogena filing (full 19 page PDF file), this appears:

. . . .123. Finally, the commercial as a whole conveys the false and misleading message that Coppertone Sport sprays provide better sun protection compared to Neutrogena Ultimate Sport sprays. That claim is false even according to Schering. Schering’s papers filed in this action contend only that Coppertone Sport’s highest SPF products provide at most parity protection compared to Neutrogena’s Ultimate Sport products. And on average, Neutrogena’s Ultimate Sport products, including the spray products, provide better sun protection than do Coppertone’s Sport products.

124. The Coppertone Sport commercial is being aired during the very first selling season for the Neutrogena Ultimate Sport line. Neutrogena has invested in Ultimate Sport years of research and development, significant advertising expenditures, and the time and effort of many Neutrogena employees and executives. A significant portion of that investment could be lost if Schering is not barred from making its false and misleading claims about the Neutrogena Ultimate Sport line.

125. Unless and until Schering is ordered to cease making its false and infringing advertising claims, Neutrogena stands to suffer a loss of sales, hard-earned reputation, and consumer confidence that it may never be able to recoup. . . .

“Ouch — that’s kinda’ lobster red, there, Missy.” An aside, here — do ya’ think it matters, at all, that J&J didn’t agree to “play ball” with CEO Hassan, on Remicade and Simponi rights outside the US — and thus, this Coppertone arguable “strike suit” was brought — almost two full years after most of the ads Schering now complains about were first introduced into the stream of interstate commerce? I do.

Simponi’s EMEA “Approvable” Recommendation Likely to Sharpen JNJ’s Abritration Focus

Simponi, a Centocor drug, has received the equivalent of an FDA “Approvable Letter” from the European Medicines Agency. This is good news for Johnson & Johnson unit Centocor. If Schering-Plough is able to convince a panel of arbitrators that it should retain the European rights to Simponi (or settle with J&J on favorable terms), this will also be good news for it. But that outcome (even, apparently, in the views of Schering-Plough and Merck, themselves — given the beefed-up “Risk Factor“ disclosure about the matter, of just yesterday, in an official SEC filing) is, at the moment, far from clear — per Reuters updated story, this morning:

. . . .Johnson & Johnson and Schering-Plough Corp’s once-monthly drug Simponi has been recommended for approval in Europe to treat moderate to severe rheumatoid arthritis, the companies said on Friday.

Decisions by the European Medicines Agency are normally endorsed by the European Commission within a couple of months. . . . .

The drugs are proving a high-stakes bone of contention in Merck & Co’s planned $41 billion purchase of Schering-Plough, because Merck has said it will inherit overseas rights to the drugs.

Under an earlier marketing deal with J&J, Schering-Plough is obliged to return overseas rights to J&J if control of Schering-Plough changes.

Merck is slated to buy Schering-Plough later this year. But the deal was structured as a “reverse merger,” meaning Schering-Plough technically would acquire larger Merck even though Merck is paying it $41 billion.

The strategy would allow Schering-Plough to claim it is a continuing enterprise and therefore has not undergone a change in control that would force it to give up overseas rights to the two arthritis drugs.

J&J has exclusive rights to sales in the United States. Schering-Plough has rights in most other markets.

Schering-Plough said in a filing last month J&J would seek to arbitrate an end to their drug partnership in the wake of the planned merger with Merck. . . .

This certainly means there will soon be much more to fight over – previously, the EU approval was seen as likely, but no one could reliably predict when the pan-European revenue stream would begin. Thus, assigning a value to the rights was a fuzzy proposition. Everyone agreed it was north of $1 billion, but how far north? Now, in the next few months, we are likely to get a sharpened sense of just how much is really at stake, here — in the single largest market for which Schering-Plough still arguably may retain its right to sell this very, very high margin drug (along with, and as a follow-on, to Remicade).

As ever, stay tuned — but I actually think this increases the chance that Schering-Plough and Merck agree to a very generous (to William Weldon’s team) royalty-sharing arrangement with JNJ/Centocor, in order to secure at least some portion of this Euro-revenue, with certainty. Even though — as I’ve said before — an “all or nothing” outcome isn’t terribly likely in most arbitrations, I think these numbers are just too high for Dick Clark to be willing to simply roll the dice — potentially seeing “snake eyes” come up — and lose it all.