Mr. Hassan's Most Significant Inconsistencies -- from the Shareholders' Meeting, this Morning

I had live-blogged it, below, but this deserves its own post. Take a look.

▲ One of the AP's Business Writers, Linda A. Johnson, is moving the first story on CEO Hassan's remarks, of this morning, concluding thus: ". . . .Hassan says Schering-Plough will never again depend on a single blockbuster like allergy drug Claritin. . . ." Well, does 2008 count, here?

Allow me -- perhaps intemperately -- to ask -- "How much of Schering's 2008 profitability will Vytorin/Zetia be?" Oh -- Right. That is technically two drugs -- not one. But it will very likely be north of 55 percent, and it was north of 60 percent, in 2007. Don't believe me? Okay. Fair enough. "Let's go to the tape", then.

Let's look at what CEO Hassan effectively swore was true, about nine days ago, when filed in his First Quarter 2008 Form 10-Q (Page 25) with the SEC, for Schering-Plough [emphasis supplied]:

". . . .Schering-Plough’s current profitability is largely dependent upon the performance of the cholesterol franchise. . . ."

In SEC-speak "largely-dependent", means well north of 50 percent.

▲ So, I guess the question becomes, Mr. Hassan, when were you telling the truth, here?

Were you telling the truth, nine days ago, to the SEC, in the Form 10-Q, when you wrote that "Schering is largely dependent upon" Vytorin/Zetia for its continued profitability?

Or, were you telling the truth, this morning, when you said that Schering "will never again be dependent" on one drug?

I hate this sort of parsing -- but I guess we'll need to know what Mr. Hassan means when he uses the phrase "will never again be". [Click on the image of the Meeting facilities, at right, to launch the REPLAY MEETING VIDEO FEED in a new window!]

Does he mean, by using the word "will" -- that 2008 doesn't count? Did 2008 just end? [Did I just miss New Year's Eve (again!?), rolling into 2009? Crud -- I hate when I do that. Heh.]

Did he actually mean to refer solely to 2009, 2010, and beyond? Is that what he means by "will"? "Never again" clearly implies that this is all in Mr. Hassan's rear-view mirror, here -- and we all. Know. It. Is. Not. So, I ask again: When was he telling the truth? When was he shading the truth, here? Who is to know? This is over half of Schering's 2008 profitability we are speaking about -- so there is, frankly, no legitimate basis upon which to be "mincing words", like this, Mr. Hassan. This is beneath you. You must be better than this. [Even in the revised version of the AP story the "will never again be" quote is prominent.]

▲ And, every bit as importantly now, how -- exactly -- does he plan to get there (2010 -- non-dependence), from here (2008 -- dependent)? These are very significant questions, to my eye. Questions unanswered by his remarks, other than vague references to "savings" from his so-called Productivity Transformation Program, this morning.

~~~~~~~~~~~~~~~~~~~~
[UPDATED MAY 17, 2008 @ 8:35 AM EDT]
~~~~~~~~~~~~~~~~~~~~


A revised version of the-above AP story now carries the following line:

". . . .[CEO Hassan] said Schering-Plough now gets more than 20 percent of its revenues from consumer and animal health products, and only about 12 percent of revenues from its cholesterol franchise. . . ."

I think that is a likely mis-quote -- we'll see on the web-cast-replay -- but I think Mr. Hassan was referring to 2002, when the above would have been true PARSING, BOBBING and WEAVING -- DODGING, yet again. . . .

It is simply irrelevant, today. Cholesterol was $5 billion last year (in 2007 revenue); but was more than 60 percent of 2007 profits. This year, it will be a less than that in revenue, certainly, but there is simply no chance that it will be less than 12 percent of the 2008 profit. None. So, again, he is mincing, mincing. . . and parsing. Unfortunate, in the extreme. These are peoples' lives, and savings, he is toying with.

The replay is now up: At 17:10 to 17:15, of Part ONE, we hear Mr. Hassan say that the "Cholesterol franchise is 12 percent. . . ." of ADJUSTED sales. . . . something [maybe "Q1"(?) can't really hear it -- but of WHAT YEAR?!]. But the feed is broken into Part Two, at exactly that spot. How convenient. Part Two picks up with the Organon Animal Health business-lines, and he is referring to "Q1 2008 sales", so I think it fair to say that Mr. Hassan means to refer to the fact that -- with Organon's sales added in in 2008 -- Cholesterol franchise ADJUSTED sales were 12 percent of the total.

But -- of course -- that is, even though technically-true, almost completely irrelevant. The Cholesterol franchise is still more than 50 percent of 2008 profitability. Trust Merck's disclosures (from Merck's April 21, 2008 First Quarter earnings conference call), for that piece of information, here (Merck is Schering's 50/50 partner on Vytorin/Zetia).

MORE UPDATING, NOW: 05.17.08 @ 8:35 AM EDT

Business Week is running the original quote. See discussion below. [Perhaps Business Week's editors know the original verion will almost ensure the article will be quoted, and filed as part of a future plaintiffs' pleading or motion, in the federal District Court, in Newark, before Judge Dennis Cavanaugh -- free publicity, that. Heh.]

The AP story now carries the line I wrote about, above, as follows: "We resolved to never again become aligned to a single product like Claritin," Hassan told the shareholders. . . ." We'll have to wait for the replay, but I thought I heard Mr. Hassan say what Linda A. Johnson wrote he said, with my own ears -- not five hours ago.

Even this -- in the revised version -- does not change my analysis above, in blue, and is still plainly a broken Fred Hassan promise:

That "resolution" was clearly broken in 2007, and 2006, when Vytorin/Zetia were perhaps two-thirds of all the profits earned at Schering.

Through the First Quarter of 2008, looking at Merck's half of that Cholesterol franchise profitability, here, we very fairly surmise that even now, in the First and Second quarters of 2008, the Cholesterol franchise dominates, and drives Schering's profitability -- rising or falling.

This is sliding from bad, to worse, here. . . .

Now, from PART TWO of the REPLAY VIDEO -- Mr. Hassan tells us Schering "will become" a "leader in earning trust" [REPLAY PART TWO, 7:24 to 7:30] -- "We know trust is not given, only earned. . . ."

I am deeply confused as to how any of the above -- the parsing, the half-truths -- and the below, the lawsuits, and the vastly-excessive executive compensation in 2008, leads in earning trust.