Schering-Plough sacrifices begin with Hassan's bonus

Schering-Plough's new chief executive and chairman Fred Hassan, has forgone a bonus of up to $2 million bonus to demonstrate his commitment to cost-cutting at the struggling company.

After completing a '100 day, 360-degree' review of the company Hassan has unveiled the next phase of his plans for stabilising and rebuilding the company.

Mr Hassan has been equally bold in cutting back his top executives' perks, reducing expenses allowances and eliminating executive privileges, and has even ordered the selling off of the company's Gulfstream aeroplane.

The review has reinforced the need for aggressive cost-cutting and containment to allow strategic investments in the company's most promising product, novel cholesterol treatment Zetia and the ZETIA/simvastatin combination products.

Hassan said: "We must make major investments in order to build value in some exciting research projects."These will be unveiled at a key analysts meeting in November."

A decline in pharmaceutical sales of 26% - mainly due to a post-patent expiry decline in sales of allergy blockbuster Claritin - and a smaller market share for key profit-generating products, have now forced the company to cut back drastically its quarterly dividend from 17 cents to 5.5 cents per common share. It is likely to result in even lower earnings per share in 2004.

The company has already set annual cost cutting targets of $200 million, and will be helped by the elimination of all bonuses for 2003, and the scrapping of an employees' profit sharing scheme, the first time this has happened in 47 years.

Hassan has seen to it that some exceptions are made to allow performance related pay increases to remain for some exceptional employees into 2004, but will also launch a voluntary early retirement programme for its US staff, which will be only the first part in a global effort to reduce its payroll.

The company will also begin a process of replacing fragmented site-based purchasing with a global procurement programme.

Schering-Plough suffered a number of woes in the months before and after Mr Hassan's arrival from Pharmacia, including a $500 million FDA fine in 2002 for breaching good manufacturing practice, and a $109 million drop in sales of blockbuster allergy treatment Claritin in the first quarter of this year, compared to $659 million in the same period last year.