The Five Dumbest Things on Wall Street This Week: April 4
04/04/08 - 07:03 AM EDT
Mike Taylor
3. Schering-Plowed
As it turns out, drugmaker Schering-Plough (SGP Quote - Cramer on SGP - Stock Picks) just isn't very good at making drugs. That's too bad, because it's what the biotech company is supposed to be doing. Its joint project with Merck (MRK Quote - Cramer on MRK - Stock Picks), Vytorin, got panned this past weekend by a cabal of doctors. Vytorin had the distinction of being one of the most expensive and well-marketed heart drugs on the market. And although it was as good at preventing harmful cholesterol from clogging patients' arteries as it was at preventing spare dollars from clogging their bank accounts, Vytorin wasn't so good at preventing heart attacks, the doctors found. Clutching their wallets in pain, Schering-Plough investors spent Monday calling their brokers to sell shares down 26% on the news. Chief among Vytorin's benefits had been its dollar value: It accounted for half of Schering-Plough's profits, which may be why Schering and Merck haven't given up on the drug's curative effects. In hopes of prolonging their moneymaker's survival, the companies have embarked on another broader series of tests, fittingly called IMPROVE-IT. Sadly, the results of that study, along with whatever value may remain in Schering-Plough, will not be known for several years. In the meantime, the company announced Wednesday that it plans to relieve 5,500 employees of their duties in an effort to cut costs in conjunction with near-certain reductions in sales. The prognosis from analysts isn't great. Credit Suisse slashed Schering-Plough's 2008 revenue forecasts by hundreds of millions of dollars. "We've taken tough actions needed in this tough environment," Schering-Plough CEO Fred Hassan said in a conference call.
Dumb-o-meter score: 85. An environment where your product is nearly worthless may be slightly worse than "tough."
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