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ScheringPlough Corp. Reports Operating Results (10-Q)

July 25, 2009 | About:

ScheringPlough Corp. (SGP) filed Quarterly Report for the period ended 2009-06-30.

Schering-Plough Corporation and its subsidiaries are engaged in the discovery development manufacturing and marketing of pharmaceutical products worldwide. The company operates primarily in the prescription pharmaceutical marketplace. However where appropriate the company has sought regulatory approval to switch prescription products to over-the-counter status as a means of extending a product's life cycle. ScheringPlough Corp. has a market cap of $44.05 billion; its shares were traded at around $26.97 with a P/E ratio of 15 and P/S ratio of 2.5. The dividend yield of ScheringPlough Corp. stocks is 1%.

Highlight of Business Operations:

In April 2008, Schering-Plough announced the Productivity Transformation Program (PTP). The goal of this program is to create a leaner, stronger company to support Schering-Plough’s goal of building long-term high performance despite the current challenging pharmaceutical industry environment and the particular challenges facing Schering-Plough. This program targets savings of $1.5 billion on an annualized basis by 2012 and is designed to reduce and avoid costs, while increasing productivity. Of the total targeted savings, approximately $1.25 billion are anticipated to be accomplished by the end of 2010. The balance of the cost savings are anticipated to be achieved by 2012. Schering-Plough believes it is on track to achieve targeted savings. During 2009, actions have begun to create greater efficiency in the global supply chain. Beyond this program, Schering-Plough anticipates investing in new high-priority clinical trials, the pursuit of strategic opportunities, including product launches and anticipates natural cost growth.

The cholesterol-reduction market is the single largest pharmaceutical category in the world. VYTORIN and ZETIA are competing in this market. Global total combined franchise sales of VYTORIN and ZETIA, declined 8 percent in the second quarter of 2009 to $1.1 billion, reflecting a 2 percent operational decrease and a 6 percent unfavorable impact from foreign exchange. Sales declined 10 percent in the U.S. In international markets, sales declined 4 percent, reflecting operational growth of 10 percent and a 14 percent unfavorable impact from foreign exchange. Global sales of Schering-Plough’s cholesterol franchise products, VYTORIN and ZETIA, declined 15 percent in the first six months of 2009 to $2.0 billion, reflecting a 10 percent operational decrease and a 5 percent unfavorable impact from foreign exchange. Sales declined 21 percent in the U.S. In international markets, sales declined 3 percent, reflecting operational growth of 12 percent and a 15 percent unfavorable impact from foreign exchange. As of June 2009, total combined prescription share for VYTORIN and ZETIA in the U.S. was down versus December 2008 from 10.1 percent to 8.6 percent. In the past, Schering-Plough’s profitability has been largely dependent upon the performance of the cholesterol franchise; while performance of the cholesterol franchise is still material to Schering-Plough, as the product diversity has become stronger (through the OBS acquisition as well as development of other Schering-Plough products) the dependence on the cholesterol franchise is lessening.

Japan is not included in the joint venture with Merck. In the Japanese market, Bayer Healthcare is co-marketing Schering-Plough’s cholesterol-absorption inhibitor, ZETIA, as a monotherapy and co-administered with a statin for use in patients with hypercholesterolemia, familial hypercholesterolemia or homozygous sitosterolemia. ZETIA was launched in Japan during June 2007. Schering-Plough’s sales of ZETIA in Japan under the co-marketing agreement with Bayer Healthcare are recognized in net sales and included in Other Pharmaceuticals. ZETIA sales in Japan totaled $41 million and $72 million for the three and six months ended June 30, 2009, respectively.

Consolidated Net sales for the three months ended June 30, 2009 totaled $4.6 billion, a decrease of $274 million or 6 percent compared with the same period in 2008, including an estimated unfavorable impact of 10 percent from foreign exchange. For the six months ended June 30, 2009, consolidated net sales totaled $9.0 billion, a decrease of $537 million or 6 percent as compared to the same period in 2008, including an estimated unfavorable impact of 10% from foreign exchange. For the three months and six months ended June 30, 2009, net sales outside the U.S. totaled $3.2 billion and $6.1 billion, respectively. Net sales outside the U.S. approximated 68 percent of consolidated net sales, for both periods.

Read the The complete ReportSGP is in the portfolios of Irving Kahn of Kahn Brothers & Company Inc., Edward Owens of Vanguard Health Care Fund, Bill Nygren of Oak Mark Fund, Bill Nygren of Oak Mark Fund, HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC, Chris Davis of Davis Selected Advisers, John Paulson of Paulson & Co., HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC, Charles Brandes of Brandes Investment, Richard Pzena of Pzena Investment Management LLC, Daniel Loeb of Third Point, LLC, Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC, Dodge & Cox.

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