This week Cramer is doing a series on CEOs, the best of the best when it comes to company turnarounds. These five executives have turned their once-dead franchises into living, thriving businesses. They’re people like Fred Hassan, the CEO at Schering-Plough, who’s already boosted a $17 stock to $32.
When Hassan arrived at Schering-Plough, he inherited almost $1 billion in criminal and regulatory fines from former CEO Richard Kogan. Kogan was also responsible for buying back billions of dollars worth of stock at high prices, and then when things went bad he actually tipped off a couple of mutual funds before telling the rest of the Street. That cost the company another $1 million settlement with the U.S. Securities and Exchange Commission. In Cramer’s humble opinion, Kogan “was the worst CEO of a major drug company” that he’d even seen.
But Hassan was confident in his ability to save SGP. He’d already turned around Wyeth, as well as merging Pharmacia and Upjohn, which he sold to Pfizer for $56 billion. Since taking the helm, Hassan has turned a 7% compound annual growth rate into 19%. SGP also blew out the numbers this past quarter, reporting 42 cents per share instead of the 29 cents expected by analysts. Gross margins are also up two percentage points after $100 million of streamlining, and still the CEO is spending $50 million more than the $558 million the Street expected he would on research and development. This guy’s not skimping, Cramer says, he’s building.
Those aren’t the only reasons Cramer expects this stock to go higher. Under Hassan’s leadership, SGP has bought Organon Biosciences from Azko Nobel for $14 billion, it’s got a $1.2 billion cholesterol franchise with Merck, key names like Remicade (for arthritis) are gaining share, and the company’s pipeline is full.
From the start, Hassan had said that his intention was to stabilize the company, repair it, build a base and then break out. He’s done all those things, Cramer says, and Home Gamers should expect more.
Bottom Line: Fred Hassan is a totally transformational CEO. He’s already given investors close to a double in SGP, and Cramer thinks he’ll take it much higher.
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