Company Name: Schering-Plough Corp.
Public Availability Date: February 10, 2005
Document Sections:
INQUIRY LETTER
APPENDIX 1
APPENDIX 2
APPENDIX 3
APPENDIX 4
APPENDIX 5
APPENDIX 6
APPENDIX 7
APPENDIX 8
APPENDIX 9
APPENDIX 10
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
December 21, 2004
By Hand
Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
450 Fifth Street, N.W.
Washington, DC 20549
Re: Schering-Plough Corporation - Shareholder Proposal Submitted by Chicago
Exhibitors Corporation, Stablecott Properties Ltd, Claude Brunet & Associes
Inc., Michele Lacroix & Associes, Benjamin J. Stein, and Joan C. Trombetta
Ladies and Gentlemen:
On behalf of Schering-Plough Corporation, a New Jersey corporation
("Schering-Plough"), we are submitting this letter pursuant to Rule 14a-8(j)
under the Securities Exchange Act of 1934 to notify the Securities and Exchange
Commission (the "Commission") of Schering-Plough's intention to exclude from its
proxy materials for its 2005 annual meeting of shareholders (the "Annual
Meeting") a shareholder proposal (the "Proposal") submitted by Chicago
Exhibitors Corporation, Stablecott Properties Ltd, Claude Brunet & Associes
Inc., Michele Lacroix & Associes, Benjamin J. Stein, and Joan C. Trombetta
(collectively, the "Proponents"). We also request confirmation that the staff of
the Division of Corporation Finance will not recommend to the Commission that
enforcement action be taken if Schering-Plough excludes the Proposal from its
proxy statement for the reasons set forth below.
Schering-Plough intends to file its definitive proxy materials for the Annual
Meeting on March 14, 2005. In accordance with Rule 14a-8(j), six copies of this
letter and its exhibits are enclosed, and one copy of this letter and its
exhibits has been sent to the Proponents.
The Proposal
The Proposal requests that Schering-Plough (i) commit specifically to using only
non-animal methods for assessing skin corrosion, irritation, absorption,
phototoxicity and pyrogenicity, (ii) confirm that it is in Schering-Plough's
best interest to commit to replacing animal-based tests with non-animal methods,
and (iii) petition the relevant regulatory agencies requiring safety testing for
Schering-Plough's products to accept, as total replacements for animal-based
methods, certain approved non-animal methods, and any other methods currently
used and accepted by the Organization for Economic Cooperation and Development
(OECD) and other developed countries. A copy of the Proposal, including the
supporting statement, is attached to this letter as Exhibit A.
Discussion
Rule 14a-8 generally requires public companies to include in their proxy
materials proposals submitted by eligible shareholders. A proposal is outside
the scope of the rule, however, and therefore need not be included in the
company's proxy materials, if the proposal falls within one of 13 substantive
bases for exclusion specified in Rule 14a-8(i). For the reasons discussed below,
we believe that the Proposal is excludable under Rule 14a-8(d) because the
Proposal exceeds 500 words; and Rule 14a-8(i)(10) because certain portions of
the Proposal have been substantially implemented.
I. The Proposal Exceeds the 500-Word Limit of Rule
14a-8(d)
Rule 14a-8(d) limits a proposal, including its supporting statement, to 500
words. If a proposal exceeds 500 words, Rule 14a-8(f) provides that the company
may exclude the proposal if (1) within 14 calendar days of receiving the
proposal, the company notifies the shareholder of the defect and the time frame
for responding (14 calendar days from receipt of notification), and (2) the
shareholder fails to correct the defect within the 14-day period.
The Proposal, as originally submitted to Schering-Plough on November 11, 2004,
exceeded 500 words. In accordance with Rule 14a-8(f), Schering-Plough responded
with a letter to the Proponents dated November 19, 2004 notifying them that the
Proposal exceeded the 500-word limit and that failure to correct the deficiency
within 14 calendar days from the date of receipt of Schering-Plough's letter
would be a basis for omitting the Proposal from Schering-Plough's proxy
materials. A copy of Schering-Plough's letter is attached to this letter as
Exhibit B.
On December 10, 2004, the Proponent's submitted a revised Proposal, a copy of
which is attached to this letter as Exhibit C. The revised Proposal is 509 words
long and therefore remains excludable under Rule 14a-8(f). In arriving at a
count of 509 words, we counted from the words "SHAREHOLDERS' RESOLUTION" to the
end of the last sentence, which begins with the words "We urge shareholders." In
counting the words in the Proposal, we followed the staff's guidance as set
forth in prior releases and no-action letters, which state that the count should
include (i) all of the words in the proposal and supporting statement, including
numbers and letters used to enumerate paragraphs (see Amgen Inc. (Jan. 12,
2004)), (ii) words such as "whereas" and "resolved" included in resolutions (see
Exchange Act Release No. 20091 (1983)), (iii) hyphenated words as two or more
words (see Minnesota Mining and Manufacturing Company (Feb. 27, 2000)), (iv)
website addresses as one word (see Staff Legal Bulletin No. 14 (July 13, 2001)),
(v) numbers as one word (see American Express Co. (Jan. 18, 1995)), and (vi)
words included in footnotes (including the footnote numbers themselves) (see
Merrill Lynch & Co., Inc. (Feb. 6, 2004) (requiring proponent to add a citation
to the specific source of a statement in spite of the proponent's assertion that
it would provide the citation if the company agreed to waive the 500-word
limitation); Halliburton Co. (avail. Jan. 30, 2001) (requiring proponent to
delete a statement regarding indexed stock options despite proponent's objection
that it could not discuss the issues more thoroughly given the 500-word limit)).
The staff has consistently allowed exclusion of proposals that exceed the
500-word limit. See, e.g., Amgen Inc. (January 12, 2004) (proponent was given
the opportunity to reduce the length of a proposal to 500 words and failed to do
so); Northrop Grumman Corp. (Mar. 17, 2000) (same); Amoco Corp. (January 22,
1997) (staff allowed omission of shareholder proposal of 501 words); Aetna Life
and Casualty Co. (January 18, 1995) (proposal excludable where proponent
attempted to circumvent the 500 word limit by using charts and graphs).
II. Portions of the Proposal Have Already Been Substantially Implemented
Rule 14a-8(i)(10) permits exclusion of a proposal "if the company has already
substantially implemented the proposal." If a major portion of a shareholder's
proposal may be omitted pursuant to Rule 14a-8(i)(10), then the entire proposal
may be omitted. See American Brands, Inc. (Feb. 3, 1993). Schering-Plough has
substantially implemented the Proposal and therefore may omit the Proposal
pursuant to Rule 14a-8(i)(10).
The Proposal requests, among other things, that Schering-Plough (1) commit
specifically to using only non-animal methods for assessing skin corrosion,
irritation, absorption, phototoxicity and pyrogenicity, and (2) confirm that it
is in Schering-Plough's best interest to commit to replacing animal-based tests
with non-animal methods. Schering-Plough already has in place policies designed
to avoid animal testing where possible and to use alternative methods where they
are reasonably available. These policies are reflected in Schering-Plough's
Animal Research Care and Use Policy, which Schering-Plough adopted in 1999 and
which is attached to this letter as Exhibit D. The Policy provides, among other
things, that:
Schering-Plough is committed to identifying, developing and using alternatives
to laboratory animal testing whenever possible;
When animals are required to obtain the safety and efficacy date needed to
develop new pharmaceuticals, Schering-Plough adheres to the highest standards of
humane and responsible animal care set forth by both government and private
agencies;1
Schering-Plough complies with the Animal Welfare Act and other regulations
governing the humane care and use of animals involved in testing;
Proposed activities involving the use of animals are reviewed by the
facility's Animal Care and Use Committee, which includes a veterinarian and one
non-company employee. The committee reviews proposed research activities
involving animals to ensure that use of animals is necessary and, if so, that
the correct species and minimum numbers are used. The Committee also ensures
that all procedures avoid or minimize discomfort, distress and pain and that no
non-animal alternatives are available.
Schering-Plough provides direct and indirect financial support to
organizations that research and develop non-animal alternatives, including the
Johns Hopkins Center for Alternatives to Animal Testing.
These policies demonstrate that Schering-Plough has already undertaken to reduce
animal testing of its products and to achieve the objectives outlined in the
Proposal.
The staff has previously allowed exclusion of a similar proposal on substantial
implementation grounds. In PPG Industries, Inc. (January 19, 2004), the staff
allowed exclusion of a proposal requesting that the board issue a policy
statement committing the company to using alternatives to product testing on
animals. PPG had pointed out that it had a long-standing policy of avoiding
animal testing where possible, endeavored to use alternatives to animal testing
where possible, endorsed research to reduce or refine animal testing, revised
its animal welfare policy to identify in vitro testing as an alternative, and
had publicly disseminated its policy after the policy was endorsed by the board
of directors. While the PPG proposal involved a request for a "policy statement"
while the Proposal calls for a "commitment," the proposals are substantively the
same in that both call for the company to expressly commit itself to pursuing a
course of conduct designed to achieve an objective, i.e., of developing
alternatives to animal testing. In the same way that PPG had already adopted
policies similar to those requested by the proponent in that matter,
Schering-Plough has already substantially implemented the Proposal through its
adoption of the policies described above. If these policies do not represent a
"commitment," Schering-Plough is at a loss to determine what more must be done
to achieve the Proponents' objective.2
Given its commitment to using non-animal methods for testing, as illustrated
above, Schering-Plough also has already "confirmed that it is in
Schering-Plough's best interest to commit to replacing animal-based tests with
non-animal methods." Considering its public statements, actions it has taken,
policies it has implemented and funds it has expended on the issue of animal
testing, it is not clear what more Schering-Plough could do to make the
confirmation that the Proponents' seek.
Conclusion
Based on the foregoing, we request your concurrence that the Proposal may be
omitted from Schering-Plough's Annual Meeting proxy materials. If you would like
to discuss the Proposal or any of the matters discussed in this letter, please
feel free to call me at (202) 637-5737.
Sincerely,
/s/
Alan L. Dye
2035274
Enclosures
ccs: Susan Ellen Wolf
Susan L. Hall
-----FOOTNOTES-----
1 Because U.S. and foreign law require Schering-Plough to conduct a limited
amount of animal testing to assure safety of certain products, complete
elimination of animal testing would cause Schering-Plough to violate applicable
law. For that reason, implementation of such a policy also should permit
exclusion of the proposal under Rule 14a-8(i)(2). We note that the staff
declined to allow exclusion of a similar proposal under Rule 14a-8(i)(2). See
Johnson & Johnson (January 30, 2004).
2 The Staff's refusal to allow exclusion of an animal testing proposal in
Johnson & Johnson (January 30, 2004) should not affect the outcome here. The
proposal in that case requested a more "general" commitment to eliminating
animal testing and requested that the company form a committee on non-animal
testing to report to shareholders. The proposal did not require that the board
confirm that it was in the best interest of the company to use non-animal
testing. In addition, while Johnson & Johnson explained that it had already
begun non-animal testing, made public statements endorsing non-animal testing
and spent funds developing non-animal testing methods, Schering-Plough has done
more than that to implement policies limiting animal testing, as discussed
above.
[APPENDIX 1]
EXHIBIT A
Copy of Proposal and Related Correspondence
[APPENDIX 2]
November 11, 2004
Corporate Secretary
Schering Plough Corporation
One Giralda Farms
Madison, New Jersey 07940-1000
Re: Shareholder Proposal for Inclusion in the 2005 Proxy Materials
Dear Secretary:
Attached to this letter is a Shareholder Proposal submitted for inclusion in the
proxy materials for the 2005 annual meeting. Also enclosed are letters from the
proponents of the resolution along with letters certifying to ownership of stock
where the shares are held in street name.
If you need any further information, please do not hesitate to contact me. If
the Company will attempt to exclude any portion of the proposal under Rule
14a-8, please let me know within 14 days of your receipt of the resolution.
After November 22, 2004, I can be reached at the following address: 8506 Harvest
Oak Drive, Vienna, VA 22182. I can also be reached on my cell phone at
202-641-0999.
Very truly yours,
/s/
Susan L. Hall, Esq.
Enclosures
SLH/pc
[APPENDIX 3]
3 November 2004
Corporate Secretary
Schering Plough Corporation
One Giralda Farms
Madison, New Jersey 07940-1000
Re: Sharcholder Proposal for Inclusion in the 2005 Proxy Materials
Dear Secretary:
Attached to this letter is a Shareholder Proposal submitted for inclusion in the
proxy statement for the 2005 annual meeting. Also enclosed is a letter from my
brokerage firm certifying to my ownership of stock. I have held those shares
continuously for more than one year and intend to hold them through and
including the date of the 2005 annual meeting of shareholders.
Please communicate with my representative, Susan L. Hall, Esq. if you need any
further information. If the Company will attempt to exclude any portion of my
proposal under Rule 14a-8, please so advise my representative within 14 days of
your receipt of this proposal. Ms. Hall may be reached at 2818 Connecticut
Avenue. N.W., Washington, D.C. 20008. The telephone number is (202) 518-2505.
Very truly yours,
CHICAGO EXHIBITORS CORPORATION
Per: /s/
Patrick W.T.C. Oswald
Director
Enclosures
cc: Susan L. Hall. Esq.
[APPENDIX 4]
3 November 2004
Corporate Secretary
Schering Plough Corporation
One Giralda Farms
Madison, New Jersey 07940-1000
Re: Shareholder Proposal for Inclusion in the 2005 Proxy Materials
Dear Secretary:
Attached to this letter is a Shareholder Proposal submitted for inclusion in the
proxy statement for the 2005 annual meeting. Also enclosed is a letter from my
brokerage firm certifying to my ownership of stock. I have held these shares
continuously for more than one year and intend to hold them through and
including the date of the 2005 annual meeting of shareholders.
Please communicate with my representative, Susan L. Hall, Esq. if you need any
further information. If the Company will attempt to exclude any portion of my
proposal under Rule 14a-8, please so advise my representative within 14 days of
your receipt of this proposal. Ms. Hall may be reached at 2818 Connecticut
Avenue. N.W., Washington, D.C. 20008. The telephone number is (202) 518-2505.
Very truly yours,
STABLECOTT PROPERTIES LTD.
Per: /s/
Patrick W.T.C. Oswald
Director
Enclosures
cc: Susan L. Hall, Esq.
[APPENDIX 5]
Corporate Secretary
Schering Plough Corporation
One Giralda Farms
Madison, New Jersey 07940-1000
Re: Shareholder Proposal for Inclusion in the 2005 Proxy Materials
Dear Secretary:
Attached to this letter is a Shareholder Proposal submitted for inclusion in the
proxy statement for the 2005 annual meeting. Also emclosed is a letter from my
brokerage firm certifying to my ownership of stock. I have held these shares
continuously for more than one year and intend to hold them through and
Including the date of the 2005 annual meeting of shareholders.
Please commumicate with my representative, Susan L. Hall, Esq. if you need any
further information. If the Company will attempt to exclude any portion of my
proposal under Rule 14a-8, please so advise my representative within 14 days of
your receipt of this proposal. Ms. Hall may be reached at 2818 Connecticur
Avenue, N.W., Washington, D.C. 20008. The telephone number is (202) 518-2505.
Very truly yours.
/s/
Claude Brunet for
Claude Brunet & Associes inc.
595 Rue Dupret, Montreal, Canada
H3E 1X2
Enclosures
cc: Susan L. Hall, Esq.
[APPENDIX 6]
Corporate Secretary
Schering Plough Corporation
One Giralda Farms
Madison, New Jersey 07940-1000
Re: Shareholder Proposal for Inclusion in the 2005 Proxy Materials
Dear Secretary:
Attached to this letter is a Shareholder Proposal submitted for inclusion in the
proxy statement for the 2005 annual meeting. Also enclosed is a letter from my
brokerage firm certifying to my ownership of stock. I have held these shares
continuously for more than one year and intend to hold them through and
including the date of the 2005 annual meeting of shareholders.
Please communicate with my representative, Susan L. Hall, Esq. if you need any
further information. If the Company will attempt to exclude any portion of my
proposal under Rule 14a-8, please so advise my representative within 14 days of
your receipt of this proposal. Ms. Hall may be reached at 2818 Connecticut
Avenue, N.W., Washington, D.C. 20008. The telephone number is (202) 518-2505.
Very truly yours,
/s/
Michele Lacroix for
Michele Lacroix & Associe, Psychologle Industrielle Inc.
595 Rue Dupret, Montreal, Canada
H3E 1X2
Enclosures
cc: Susan L. Hall, Esq.
[APPENDIX 7]
October 11, 2004
Corporate Secretary
Schering Plough Corporation
One Giralda Farms
Madison, New Jersey 07940-1000
Re: Shareholder Resolution for Inclusion in the 2005 Proxy Statement
Dear Sir or Madame:
Attached to this letter is a Shareholder Proposal submitted for inclusion in the
proxy statement for the 2005 annual meeting. Also enclosed is a letter from my
brokerage firm certifying to my ownership of stock. I have held these shares
continuously for more than one year and intend to hold them through and
including the date of the 2005 annual meeting of shareholders.
Please communicate with my representative, Susan L. Hall, Esq. if you need any
further information. If the Company will attempt to exclude any portion of my
proposal under Rule 14a-8, please so advise my representative within 14 days of
your receipt of this proposal, Ms. Hall may be reached at 2818 Connecticut
Avenue, N.W., Washington, D.C. 20008. The telephone number is (202) 518-2505.
Very truly yours,
/s/
Benjamin J. Stein
Enclosures
cc: Susan L. Hall, Esq.
[APPENDIX 8]
October 28, 2004
Corporate Secretary
Schering Plough Corporation
One Giralda Farms
Madison, New Jersey 07940-1000
Re: Shareholder Proposal for Inclusion in the 2005 Proxy Materials
Dear Seoretary:
Attached to this letter is a Shareholder Proposal submitted for inclusion in the
proxy statement for the 2005 annual meeting. Also enclosed is a letter from my
brokerage firm certifying to my ownership of stock. I have held these shares
continuously for more than one year and intend to hold them through and
including the date of the 2005 annual meeting of shareholders.
Please communicate with my representative, Susan L. Hall, Esq. if you need any
further information. If the Company will attempt to exclude any portion of my
proposal under Rule 14a-8, please so advise my representative within 14 days of
your receipt of this proposal. Ms. Hall may be reached at 2818 Connecticut
Avenue, N.W., Washington, D.C. 20008. The telephone number is (202) 518-2505.
Very truly yours,
/s/
Enclosures
cc: Susan L. Hall, Esq.
[APPENDIX 9]
SCHERING PLOUGH SHAREHOLDERS' RESOLUTION
This Proposal is submitted by a collective of concerned sharcholders.1
WHEREAS, statistics published by research oversight bodies in North America and
Europe document that the vast majority of painful and distressing animal
experiments are conducted to satisfy outdated, government-mandated testing
requirements2 and that such testing is on the rise;3 and
WHEREAS, nearly 60% of animals used in regulatory testing suffer pain ranging
from moderate to severe, all the way to pain near, at, or above the pain
tolerance threshold,4 generally without any pain relief; and
WHEREAS, non-animal test methods are generally less cxpensive,5 more rapid, and
always more humane, than animal-based tests; and
WHEREAS. unlike animal tests, non-animal methods have been scientifically
validated and/or accepted as total replacements for the following five toxicity
endpoints: skin corrosion (irreversible tissue damage), skin irritation (milder
and reversible damage), skin absorption (the rate of chemical penetration),
phototoxicity (an inflammatory reaction camsed by the interaction of a chemical
with sunlight), and pyrogencity (a fever-like reaction that can occur when
certain intravenous drugs interact with the immune system);
NOW THEREFORE BE IT RESOLVED, that the shareholders request that the Board:
1. Commit specifically to using only non-animal methods for assessing skin
corrosion, irritation, absorption, phototoxicity and pyrogenicity.
2. Confirm that it is in the Company's best interest to commit to replacing
animal-based tests with non-animal methods.
3. Petition the relevant regulatory agencies requiring safety testing for the
Company's products to accept as total replacements for animal-based methods,
those approved non-animal methods described above, along with any others
currently used and accepted by the Organization for Economic Cooperation and
Development (OECD) and other developed countries.
Supporting Statement: This Resolution is designed to harmonize the interests of
sound science with the elimination of animal-based test methods where non-animal
methodologies exist. It seeks to encourage the relevant regulatory agencies to
join their peers in accepting validated in vitro and other non-animal test
methods. It will not compromise consumer safety or violate applicable statutes
and regulations.
Further, this Resolution commits the Company to end animal testing for five
specific endpoints in favor of valid non-animal methods. These include the 3T3
Neutral Red Uptake Phototoxicity Test, human skin equivalent tests for
corrosivity, and a human blood-based test for pyrogenicity, all of which have
been successfully validated through the Buropean Centre for the Validation of
Alternative Methods.6 Several non-animal methods have also been adopted as Test
Guidelines by the OECD7 (an alliance of 30 member countries inoluding the US. EU,
Japan, Canada and Australia). Regulatory agencies in OECD member countries are
not at liberty to reject data from non-animal tests for skin corrosion, skin
absorption and phototoxicity where such data have been ganerated in accordance
with an OECD Test Guideline.
We urge shareholders to support this Resolution.
-----FOOTNOTES-----
1 The proponents of this Resolution are Chicago Exhibitors Corporation, Stablecott Properties Ltd; Claude Brunet & Associ|pi|qes Inc., Michele Lacroix &
Assocics, Benjamin J. Stein, and Joan C. Trombetta.
2 CCAC Animal Use Survey - 3001: http://www.ccac.ca/english/FACTS/Facframeaus2001.htm
3 Statistice of Scientific Procedures on Living AnimalsGreat Britain - 2002.
http://www.official-documents. co.uk/document/cm 58/5886/5886.htm
4 CCAC Animal Use Survey - 2001
5 Derelanko MJ and Hollinger MA (Eds.). (2002). Handbook of Toxicology, Second
Ed, 1414 pp. Washington, DC: CRC Press.
6 ECVAM website: http://ecvam.jrc.it
7 OECD test guidelines: http://www.oecd.org/document/22/0.2340.cn 2649 34377
1916054 1 1 1 1,00.html
[APPENDIX 10]
EXHIBIT C
Copy of Revised Proposal
1. Commit specifically to using only non-animal methods for assessing skin
corrosion, irritation, absorption, phototoxicity and pyrogenicity.
2. Confirm that it is in the Company's best interest to commit to replacing
animal-based tests with non-animal methods.
3. Petition the relevant regulatory agencies requiring safety testing for the
Company's products to accept as total replacements for animal-based methods,
those approved non-animal methods described above, along with any others
currently used and accepted by the Organization for Economic Cooperation and
Development (OECD) and other developed countries.
Supporting Statement: This Resolution is designed to harmonize the interests of
sound science with the elimination of animal-based test methods where non-animal
methodologies exist. It seeks to encourage the relevant regulatory agencies to
join their peers in accepting validated in vitro and other non-animal test
methods. It will not compromise consumer safety or violate applicable statutes
and regulations.
Further, this Resolution commits the Company to end animal testing for five
specific endpoints in favor of valid non-animal methods. These include the 3T3
Neutral Red Uptake Phototoxicity Test, human skin equivalent tests for
corrosivity, and a human blood-based test for pyrogenicity, all of which have
been successfully validated through the European Centre for the Validation of
Alternative Methods.5 Several non-animal methods have also been adopted as Test
Guidelines by the OECD6 (an alliance of 30 member countries including the US, EU,
Japan, Canada and Australia). Regulatory agencies in OECD member countries are
not at liberty to reject data from non-animal tests for skin corrosion, skin
absorption and phototoxicity where such data have been generated in accordance
with an OECD Test Guideline.
We urge shareholders to support this Resolution.
-----FOOTNOTES-----
5 ECVAM website: http://ecvam.jrc.it
6 OECD test guidelines: http://www.oecd.org/document/22/0.2340.cn 2649 34377
1916054 1 1 1 1,00.html
[INQUIRY LETTER]
January 24, 2005
BY ELECTRONIC MAIL: cfletters@sec.gov
Office of the Chief Counsel
Division of Corporation Finance
U.S Securities and Exchange Commission
450 Fifth St., N.W.
Washington, D.C. 20549
Re: Shareholder Proposal by Concerned Members of People for the Ethical
Treatment of Animals ("PETA") for Inclusion in the 2005 Proxy Statement of
Schering-Plough Corporation
Ladies and Gentlemen:
This letter is filed in response to a letter dated December 21, 2004, submitted
to the SEC by Schering-Plough Corporation ("Schering" or "the Company"). The
Company seeks to exclude from its 2005 proxy statement a proposal sponsored by
six concerned shareholders.1 The Company's grounds for seeking to omit the
proposal are pursuant to Rule 14a-8(i)(10) as substantially implemented, and
pursuant to Rule 14a-8(d) as exceeding the 500-word limitation.
The resolution under review requests that Schering consider the following:
1. Commit specifically to using only non-animal methods for assessing skin
corrosion, irritation, absorption, phototoxicity and pyrogenicity.
2. Confirm that it is in the Company's best interest to commit to replacing
animal-based tests with non-animal methods.
3. Petition the relevant regulatory agencies requiring safety testing for the
Company's products to accept as total replacements for animal-based methods,
those approved non-animal methods described above, along with any others
currently used and accepted by the OECD and other developed countries.
For the reasons that follow, the proponents respectfully disagree with the
Company's position that the Proposal should be omitted and urge the Staff to
rule accordingly.2
The Deadline Required by Rule 14a-8(j)(1)
The Company admits on the first page of its December 21, 2004 no-action letter
that it "intends to file its definitive proxy materials for the Annual Meeting
on March 14, 2005." Rule 14a-8(j)(1) imposes certain deadlines on the Company in
connection with attempting to omit a shareholder resolution. The Rule requires
in relevant part that:
If the company intends to exclude a proposal from its proxy materials, it must
file its reasons with the Commission no later than 80 calendar days before it
files its definitive proxy statement and form of proxy with the Commission. The
company must simultaneously provide [the proponent] with a copy of its
submission.
We do not know when Schering-Plough filed its no action letter with the SEC;
however we do know when they served it on the proponents of the resolution -
namely by certified mail, signed for on January 22nd, and contained in an
envelope post-marked January 19, 2005. (Copy attached.) In short, Schering's no
action letter is fully one month late in being served on the proponents of the
resolution.
Accordingly, on the basis of its untimely submission, the no action letter
submitted by the Company should be disregarded in its entirety.
Rule 14a-8(i)(10): Substantially Implemented
In its no action letter, Schering suggests that "certain portions of the
Proposal have been substantially implemented." Ipso facto certain portions of
the Proposal have not been implemented. In order for the Company to assert that
the substance of the Proposal has been implemented, it must be able to
demonstrate that it uses in vitro tests for assessing "skin corrosion,
irritation, absorption, phototoxicity and pyrogenicity," when and where
applicable, together with a general commitment to "replacing animal-based tests
with non-animal methods," and followed by petitioning "regulatory agencies" to
accept validated in vitro assays.
Schering has implemented none of the foregoing. The Company's no action letter
entirely fails to address these five specific non-animal test methods and
instead highlights its "Animal Research Care and Use Policy." The major premise
of the Policy is that "animals remain essential to evaluating potential new
medicines and assuring human safety" and that "animals will continue to be
necessary to understanding ailments afflicting humans ..." As its name suggests,
the "Policy" is entirely focused on the "care and use" of animals used in
Schering's research, not on any of the points in the Proposal. The Company touts
its compliance with the Animal Welfare Act (required by law), its high standards
of responsible animal care, and its oversight of animal tests. All of which miss
the point. The resolution asks Schering to commit to using five validated
non-animal methods to test for five specific endpoints.
Unlike the highly specific and prescriptive toxicity testing requirements that
exist for pesticides and certain other types of chemicals, the pre-clinical
safety testing of pharmaceuticals tends to be a more flexible and interactive
process, involving extensive dialogue and negotiations between a product
manufacturer and relevant regulatory bodies. This process affords companies like
Schering an excellent opportunity to request that relevant regulatory agencies
"accept as total replacements for animal-based methods, those approved
non-animal methods described above, along with any others currently used and
accepted by the OECD..." Neither Schering's support for the Johns Hopkins Center
for Alternatives to Animal Testing nor its general policies on animal research,
is a substitute for the kind of direct and active liaison with regulatory
agencies in the U.S. and abroad that is needed to persuade these agencies to
become more accepting of validated non-animal test methods such as those
outlined in the Proposal (most of which have not been widely accepted by U.S.
agencies).
In sum, it is apparent that Schering has not substantially implemented the
proposal. Accordingly, the Staff should decline to concur with the Company's
view on this point.
Rule 14a-8(d): 500 Word Limitation
It is a sorry commentary on the both the legal profession and Schering's
desperate attempt to avoid shareholder review of the resolution, that the
Company argues the 500-word Rule. If actual "words" were counted, the resolution
is 434 words. For the footnotes, add another 51 words, for a total of 485,
comfortably below the 500-word limitation.
So how does Schering support its 9-word excess argument? Apparently by richly
compensating the law firm of Hogan and Hartson to perform these exacting
calculations: |[NCCDEF] |[UCA1] |[TDC4,MP1,QL,I2,S1] |[TCC6,M'000']
|[TCC4,M':::',QL,G.2] |[XT] |[XT] |[ST]|[LC5]|[RS4]Number of words in text
counting hyphenates as two:|[UL] |[TA]434 |[ST]Number of footnotes multiplied by
two (once in text, once as footnote)|[UL] |[TA]12 |[ST]Number of middle initials
in sponsors' names|[UL] |[TA]2 |[ST]Number of ampersands in corporate entities'
names|[UL] |[TA]2 |[ST]Number of paragraphs with alphabet enumerations (A
through E)|[UL] |[TA]5 |[ST]Number of paragraphs with numeric enumerations
(Resolved Clauses 1-3)|[UL] |[TA]3 |[ST]Words in footnotes|[UL] |[TA]51 |[ST]
|[TA]|[TU204] |[ST4]|[LC5]|[RS6]Grand Total|[RS4]|[UL]|[RS6] |[TA]509 |[TA]\3/
|[ST]|[LC5]|[TN1,3]??????|[QL] |[ST]|[LC5]|[RS1]|[TN1,3]\3/ Laudably, Schering
has not argued for including punctuation in the tally.|[QL] |[ET]
This is an argument that should be an embarrassment to both Schering and its
attorneys. Perhaps next year they will devote more time to complying with the 80
day requirement of Rule 14a-8(j)(1), and less time to counting ampersands and
middle initials to advance a frivolous argument.
Conclusion
For the foregoing reasons, the proponents request that the Staff recommend
enforcement action if the proposal is omitted from the Company's proxy materials
for the 2005 annual meeting. Alternatively, should the Staff disagree with the
conclusions expressed herein, we would request the opportunity to confer with a
member of the Staff before issuance of the SEC's response.
I can be reached directly by telephone at 703-319-2196, or by mail at 8506
Harvest Oak Drive; Vienna, VA 22182.
We thank the Staff for its consideration of this response.
Very truly yours,
/s/
Susan L. Hall
SLH/pc
cc: Alan L. Dye (via e-mail)
-----FOOTNOTES-----
1 The sponsors of the proposal are Chicago Exhibitors Corporation, Stablecott
Properties Ltd., Claude Brunet & Associes Inc., Michele Lacroix & Associes,
Benjamin J. Stein, and Joan C. Trombetta. The two individual sponsors and the
four principles of the corporate sponsors are members of PETA. As noted in the
respective sponsors' letters to the Company, the undersigned was designated as
the legal representative for each.
2 The Staff should note that nearly identical proposals to the one under review
have already been ruled on by the Staff on five separate occasions: three
rulings in 2004 (Johnson & Johnson, Pfizer, and Wyeth) and two in 2005 (J&J
again and General Electric). In each instance the Staff ruled that it could not
concur with the Company's reasons for omitting the proposal.
[STAFF REPLY LETTER]
February 10, 2005
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Schering-Plough Corporation
Incoming letter dated December 21, 2004
The proposal requests that the board commit to using non-animal methods for
certain assessments, commit to replacing animal-based tests and petition the
relevant regulatory agencies to accept non-animal methods as replacements for
animal based methods.
We are unable to concur in your view that
Schering-Plough may exclude the proposal under rule 14a-8(d). Accordingly, we do
not believe that Schering-Plough may omit the proposal from its proxy materials
in reliance on rule 14a-8(d).
We are unable to concur in your view that Schering-Plough may exclude the
proposal under rule 14a-8(i)(10). Accordingly, we do not believe that
Schering-Plough may omit the proposal from its proxy materials in reliance on
rule 14a-8(i)(10).
Sincerely,
/s/
Robyn Manos
Special Counsel
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