The difference between voluntary retirement and being fired may make a big monetary difference for Hermelin, who was credited with $8.66 million in total compensation last year. Adam Greene, an analyst at Stanford Group in New York, thinks KV's governance situation may remain messy for a while. "We do not expect this disagreement to go away quietly and (would) not be surprised if a legal dispute followed," he wrote in a research report this week. KV faces at least seven shareholder suits over the drop in its stock price, and a battle with its ex-CEO will add to its legal bills. If this goes to court, though, at least we may learn more about the boardroom intrigue that turned a retirement into a firing within a matter of hours.
KV and Hermelin put out dueling announcements Friday, with the former CEO saying he had decided to retire and informed the company of his decision Monday. KV acknowledged Hermelin's position but said he was being terminated immediately for cause. According to Steinberg, the difference likely relates to Hermelin's retirement benefits. While a sale is now more likely, Steinberg said Hermelin would have to approve the deal because he controls about 60 percent of the company's stock through a family trust. Buckingham Research Group analyst David Buck said the change in leadership might be a relief to Wall Street, but the company is still facing weak sales of key products and threats of generic competition.
Friday afternoon, KV said it fired Hermelin and removed him as chairman of the board. The stock jumped in the last hour of trading, and analysts analyst said the move could allow the company to move past a variety of issues and might improve the odds of KV being sold. In afternoon trading, KV shares jumped 50 cents, or 11.1 percent, to $5. The stock rose 16.9 percent Friday. Deutsche Bank analyst David Steinberg said the move was "extremely surprising" because Hermelin had been CEO since 1975.
The leading estrogen patches such as Bayer HealthCare Pharmaceuticals' Menostar represent a $300 million a year market, but oral contraceptives led by Wyeth's Premarin pill hold the biggest chunk of the market for estrogen, Oppenheimer analyst Kevin DeGeeter, told BioWorld Today. Evamist, another estrogen gel by KV Pharmaceutical, was launched in the last six months, he said. When male and female patients are given a choice between the three formulations - pill, patch or gel - they consistently chose the pill, DeGeeter said. But he said the message to physicians should not focus on the formulation, rather on "the amount of estrogen delivered to a woman . Most physicians have never really heard the message yet."
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