SCHERING-PLOUGH UNDER SCRUTINY
Regulators question whether information leak led to stock sell-off
Richard J. Kogan, Schering-Plough's chairman and CEO, is the latest executive having to answer questions about his company's actions.
The Securities & Exchange Commission has asked the drugmaker to provide information related to meetings it held with investors two weeks ago and other communications made around the same time. The company says it welcomes the opportunity to cooperate and believes it has complied with all applicable securities laws, such as the nearly two-year-old fair disclosure regulation.
Schering-Plough reportedly met with Putnam Investments on Oct. 1 in a meeting said to have been open to the public. As of March 31, the institutional investment firm was the company's third-largest stockholder, owning about 3.5% of its stock, or more than 51 million shares.
Starting on Oct. 1 and for the next few days, daily trading volumes of the company's shares were quadruple what had been normal. However, it wasn't until late in the evening on Oct. 3 that Schering-Plough publicly released a negative earnings outlook. By Friday, Oct. 4, the share price hit a six-year low of $16.10 after falling almost 19% over the four days.
What Schering-Plough announced on Oct. 3 was a third-quarter earnings forecast of 28 to 29 cents per share, down from 41 cents posted in the same period a year ago. Results for 2002 are expected to be $1.58, about even with those for 2001, and 2003 results are projected to be well below previous expectations, at just $1.00 to $1.15 per share.
"We anticipate having to overcome a transition period of lower earnings, with strong growth resuming in 2004," Kogan said in the outlook. The company's troubles stem largely from the fact that its allergy drug Claritin, with $3 billion per year in prescription sales, is expected to shift to over-the-counter status on Nov. 28.-