Schering-Plough president dumped virtually all her exercisable options in 2007.

Fred Hassan's management team, including Schering-Plough president Carrie Cox are now being investigated by Congress for possible insider trading, during a time period when the company held back information about the pivotal failed trial, Enhance.

Carrie Cox, as reported earlier, suddenly sold of 900,000 SGP options, total value of $28 million, in April and May of 2007. Three other Hassan direct reports also dumped their stock options during the same time period.

According to Schering-Plough's 2007 DEF 14A SEC filing, the options Carrie Cox's sold were virtually ALL her exercisable stock options:

Per December 31, 2006 Carrie had 450,000 options with a price of 18.50 that were exercisable, and 300,000 with a price of 18.20. Also exercisable were an additional 133,334 options. According to the schedule above, not all vested option were actually exercisable. Insider transaction data above this chart shows that Carrie decided to sell her first two grants (18.20 and 18.50) in April and May of 2007, and by then the second part, 150,000 options at a price of 18.20 had also become exercisable. This means Carrie sold 900,000 options and kept only 133,000 that were exercisable; in essence she got rid of 90% of her exercisable options and used impeccable timing:

Carrie could have kept her options until 2013 and 2014 respectively. This means by selling in 2007 she lost the opportunity for another SEVEN years of increasing stock value.

Clearly she felt that this opportunity was WORTH LESS, than the value of avoiding the risk Schering-Plough would LOSE VALUE and not be worth a cent more in seven years than it was when she sold off her holdings.

So far she's been right, but the bigger risk now is for her to end up in a Sam Waksal situation - of ImClone  infamy. He was sentenced to 87 months in jail and a $3 million fine for charges of insider trading and fraud related to his attempts to sell stock after learning that U.S. regulators would reject an application for his company's cancer drug, Erbitux. A couple of years later his drug got approval the stock rebounded.

That's losing it both ways. And even if Carrie is convicted of nothing, she's already lost in the eyes of the public opinion and her employees. Her actions do not show any faith in her company.

This may be one reason we haven't seen Fred Hassan selling off his options. He's an old fox and knows the game, including what looks bad and what doesn't. Carrie still has much to learn from her long-time mentor and benefactor and not even Fred may be able to save Carrie from herself this time.

Comments

[Jack Friday]

Great job Peter!