About a two and a half years ago (March 20, 2006), the bad, old Goldman Sachs — when its fancy Bank Holding Company structure (and thus regulated by, and eligible for bailouts from, the Fed’s trough) wasn’t even a glimmer in its eye, had started Schering as “Inline Perform“. . . .
Press Fast Forward: Now, as the Sunday-morning hangover fog from “bonuses-for-massive-failures-of-judgment” clears away — the shiny new Goldman has, in conjunction with rating Pfizer a “Sell“, called Schering a “Neutral“. A Volvo sedan, if you will — a beige Volvo sedan.
In other words — no change since March of 2006. Really — there has been “no change” in Schering, since March of 2006? Color me. . . um, beige, as to that particular proposition. A very-curious beige, though.
More seriously, I might suggest that every factor that led Goldman to rate Pfizer a “Sell” — would apply with equal, or greater force — to Schering’s plight. To be fair, on Goldman’s side of the table, there is the argument that Schering does not face as precarious a near-term patent “cliff” as Pfizer, but Pfizer also has far more cash, and more than triple the size, to weather the storm, or to “go shopping” — to buy fillers for its pipeline — in selected, promising areas of therapy, and clearly, in emerging markets.
The fact is, Schering faces (now — and through 2010) a similarly massive incursion of generics — to be fully realized in the new year — into over half of all its profitability — on the Vytorin/Zetia flagship. There is no question that generic statins, particularly (at one-tenth the price), and branded statins, generally (at one-third the price) will shear off perhaps a little more than half of all those profits, and cash-flow, next year — in 2009. Schering, and Merck, have all but said so in their SEC filings. Schering is simply too small, and too poorly managed, at this point — to weather that storm successfully (contra examples: Pfizer and Merck).
Oh. Right. Did I mention already that Goldman Sachs might still have a little less than $800 million reasons NOT to list Schering as a “Sell” (and thus place even more pressure on Schering’s price per share)? Yep — either directly, or through “reputational exposures” to its private wealth clients — it might. Hmmmmm. Interesting.
Looking for something to sell? Sell Schering. Short. Here endeth the sermon.