Schering-Plough’s quarterly results surpass expectations

Drugmaker Schering-Plough Corp reported higher-than-expected quarterly earnings on Tuesday, helped by cost cutting, but sales of its two cholesterol drugs fell sharply amid concerns about their effectiveness.

Schering-Plough said last fall it planned to cut a large proportion of its US sales force to eliminate costs related to its recent purchase of Organon BioSciences. The programme is meant to create cumulative savings of $1.5 billion by late 2012. The company reported quarterly sales from Organon of $1.3 billion, compared with $626 million from the partial quarter a year earlier. (See: Akzo Nobel sells Organon BioSciences to Schering-Plough for €11 billion)

The company earned $442 million, or 27 cents per share, in the fourth quarter. That compared with a loss of $3.4 billion, or $2.08 a share, a year earlier, when it took charges for the Organon purchase. Excluding special items, Schering-Plough earned 39 cents per share. Analysts on average expected 30 cents.

Sales rose 17 per cent to $4.35 billion as the company included a full quarter from Organon compared with a partial quarter the year earlier. CEO Fred Hassan is cutting 10 per cent of Schering-Plough's workforce to save as much as $1.5 billion a year as US sales tumble for the cholesterol pills Zetia and Vytorin. Doctors shunned the pills after a January 2007 study showed they may work no better than a generic medicine sold at a seventh of the price.

Consequently, revenue from its Vytorin and Zetia cholesterol treatments, sold in partnership with Merck & Co, plunged 26 per cent in the fourth quarter to $1.1 billion. Including its half share of sales from the joint venture with Merck, Schering-Plough revenue in the quarter would have been $4.9 billion.

The programme announced in November to eliminate $1.5 billion in costs by 2012 is moving faster than anticipated, with $600 million already accounted for, CFO Robert Bertolini told investors.

''We've accelerated that, we've pushed that up,'' Bertolini said. ''We're on track with the $1.5 billion. I think we're comfortable with that number, we're not increasing it.''

Schering-Plough is considered a possible takeover target because of its relatively digestible size and because none of its big products face generic competition in the next few years, when many rival large drugmakers face patent expirations.

Schering-Plough's arthritis drug Remicade fared well in the quarter, with sales rising 8 per cent to $491 million. Brain cancer drug Temodar rose 4 per cent to $242 million. Sales of company consumer products fell 14 per cent to $219 million, mainly due to inventory-stocking patterns that hurt over-the-counter sales of its Claritin allergy drug.

Schering-Plough is now in a bigger spotlight in view of Pfizer's announcement last week that it would buy Wyeth in a deal valued at $68 billion. Some investors expect that transaction to stimulate more consolidation in the industry, whose profits have been hurt by generic competition and failure of drugmakers to launch replacement big-selling medicines. (See: Pfizer-Wyeth create $68-billion blockbuster deal)