When a stock gets pummeled in response to an earnings miss, investors should ask themselves whether it represents an entry-point or a reason to sell. Cramer said the beating that Schering-Plough took Monday should be looked at as an entry-point.
Cramer urged patience with SGP because he believes in CEO Fred Hassan – and also because he thinks the company’s consumer products business, led by Coppertone sunscreen, could bring big profits to its bottom line.
Speaking to Cramer by phone, Hassan said the stock got taken down because of the “no guidance effect.” (The company does not release guidance as a matter of policy.) Hassan thinks the outlook for SGP is “very exciting” nonetheless, largely due to its Organon acquisition, which will help SGP diversify away from its cholesterol drugs, and Sugammedex, a promising new drug for anesthesia care in Phase III clinical trials.
Switching gears, Cramer talked to Hassan about Coppertone, a potentially unlikely star product for the drug giant.
After reading Mark Penn’s Microtrends, Cramer learned that the mortality rate from skin cancer is up 50% in the last thirty years. With that astounding statistic, he expects melanoma prevention to garner more attention, which could lead to higher Coppertone sales or possibly even SGP selling its consumer products division – currently 10% of SGP’s sales – at a big premium.
Hassan called SGP the “innovators in the field” of melanoma and Coppertone the “brand leader.” Since there are no patent expirations for sunscreen, the business “goes on and on forever,” he said, leaving Coppertone and SGP ready to reap the benefits.
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