AP Features, January 29th, 2007
Schering-Plough Corp. said Monday its fourth-quarter profit surged 75 percent as strong sales of the drugmaker's cholesterol, arthritis and allergy medicines helped offset rising research and marketing spending.
Kenilworth, N.J.-based Schering-Plough said net income totaled $182 million, or 12 cents per share, up from $104 million, or 7 cents per share, a year ago. The latest quarter includes a charge of 4 cents per share to streamline the company's manufacturing operations and a charge of a penny per share to license an over-the-counter heartburn treatment.
Excluding items, the company posted profit of 17 cents per share, matching Wall Street's consensus estimate, according to a Thomson Financial poll.
"We're very pleased about the strong quarter, a strong year and a strong three-year track record," said Fred Hassan, who 3 1/2 years ago took over as chairman and chief executive officer and started an ambitious turnaround plan.
Hassan told analysts during a conference call that his company's sales, adjusted to include revenue from its joint venture with Merck & Co. on cholesterol drugs, have grown more than twice as fast as the three-year average for other U.S. pharmaceutical companies.
Still, Schering-Plough shares fell 27 cents, or 1.1 percent, to close at $24.82 on the New York Stock Exchange.
"This is a reflection that they met their earnings exactly and didn't have a little bit extra," said analyst Steve Brozak of WBB Securities.
Sales grew 14 percent to $2.65 billion from $2.32 billion a year ago, beating analysts' forecast of $2.53 billion, as five of the top seven products had double-digit revenue increases. Sales of anti-inflammatory drug Remicade, for disorders such as rheumatoid arthritis and ulcerative colitis, jumped 34 percent to $337 million, while allergy drug Nasonex revenues advanced 37 percent to $253 million.
Sales from its global joint venture with Merck, which sells Vytorin and Zetia, totaled $1.1 billion in the 2006 fourth quarter, up from $755 million in the 2005 period.
That was exciting, Brozak said, given that generic versions of Merck's blockbuster cholesterol drug Zocor hit the market starting late last June and managed-care insurers have been pushing patients to switch to the much-cheaper generics.
"My only question is how much will they have to spend in the future to grow those numbers or to maintain them," Brozak said, noting that he believes Merck and Schering-Plough spent more than $200 million to promote the two drugs last year.
Adjusting total Schering-Plough's sales results to include the joint venture, Schering-Plough said it had $3.2 billion of revenue, up 18 percent from $2.7 billion a year ago.
The company said sales of its Peg-Intron hepatitis C product declined 3 percent to $208 million mainly on lower sales in Japan, as the number of new patients starting hepatitis C therapy leveled off there.
Selling, general and administrative costs grew 12 percent to $1.3 billion, reflecting ongoing investments in emerging markets and marketing for new products. Research and development spending increased 33 percent to $631 million due to more patients participating in clinical trial of experimental drugs and an upfront payment to license a nonprescription version of heartburn medication Zegerid.
Meanwhile, the company said it has substantially completed manufacturing streamlining that will save $100 million a year: cutting a combined 500 jobs from plants in Kenilworth and Union, N.J., closing a 550-worker plant in Manati, Puerto Rico, and cutting 50 jobs from another plant in Las Piedras, Puerto Rico.
For the full year, net income hit $1.06 billion, several times the $183 million posted a year earlier, when the company had sharply lower income from the cholesterol venture and took a $250 million charge to cover costs related to government probes, since settled, regarding its manufacturing practices. Sales for 2006 rose 11 percent to $10.6 billion.
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