This summary is based on the third quarter fiscal 2007 earnings call conducted by Schering-Plough Corp. (SGP) on October 22, 2007.
Management:
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Vice President, IR: Alex Kelly
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Chairman and CEO: Fred Hassan
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CFO: Bob Bertolini
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Head, Global Pharmaceuticals Business: Carrie Cox
Key Investors Issues
- Sales increased 9% to $2.8 billion from $2.6 billion in 2006.
- Earnings increased 180% to $713 million or 45 cents a share.
- The firm prepares for the intergartion of Organon BioSciences.
Year-to-date Results
- Net sales increased by 12.7% from $7.9 billion in 2006 to $9 billion.
- Net income rose 50% to $1.8 billion or $1.15 a share.
- R&D expenses marginally increased to $3.8 billion.
Third Quarter Highlights
Sales increased 9% to $2.8 billion, from $2.6 billion in the prior year reflecting continued sales growth across each of the customer segments.
- Currency had a 3% favorable impact as the dollar continued to weaken.
- The firm continued to see good growth across the portfolio, with contributions from REMICADE, NASONEX, TEMODAR, and AVELOX.
- On the Animal Health side, sales grew 8% with good performance outside the US, especially in poultry, companion animal, swine and aquaculture.
- The firm is looking forward to gaining additional scale in the animal health segment, with a planned acquisition of Intervet.
Consumer Health sales increased 5% due to the successful launch of MiraLAX and growth of CLARITIN OTC.
- Earnings increased 180% to $713 million or 45 cents a share, from $287 million or 19 cents a share in the prior year due to a net gain of $294 million or 18 cents a share, primarily related to the market-to-market gain on the currency option for the OBS acquisition.
- The gross margin, a 67.1% improved, mostly due to cost savings from streamlining actions.
- SG&A increased 9% to $1.3 billion from $1.2 billion in the prior year due to additional promotional investments to drive top line growth as a result of increased competitive pressures on some of the key brands and continued spending to gain share for drugs like ASMANEX and MiraLAX.
The firm continues to see good growth contributions from key products, such as REMICADE, NASONEX, TEMODAR and AVELOX.
- Seven of the top-10 products continue to grow double digits, including ZETIA and VYTORIN, and the cholesterol franchise continued to be a driver.
- VYTORIN and ZETIA are the only major brands that have continued to grow their market share during the disruption that began in December 2006 caused by multi-source generics.
- Evolving medical science continues to find that reaching lower and lower goals for LDL is better for patients and VYTORIN and ZETIA provides very good options.
- The firm delivered growth in the Animal Health and Consumer Healthcare segments and over-the-counter CLARITIN reached a cumulative $2 billion in net sales, since its launch.
After only seven months in the market, MiraLAX is already the number two brand in the US with 7% market share compared to the well-known market leading brand in this category with 13%.
- In Animal Health, the firm surpassed $1 billion in cumulative net sales of the multi-species anti-infective NUFLOR and related brands, an example of a strategy of creating added-value from a human health molecule, by moving it into Animal Health.
Transformational opportunities:
- Thrombin Receptor Antagonist (TRA) is a special product discovered in the lab and is unique, distinct and complementary to current antiplatelet therapy.
- The firm has just completed two small Phase II studies in Japan that were designed to confirm the safety of TRA in Japanese patients and each trial confirms that the previous Phase II trial, that TRA does not increase TIMI major and minor bleeding when added to standard of care therapy, and the TRA is well-tolerated.
- The company now has more than 1,200 patients from three Phase II studies that point to a favorable safety and efficacy profile for TRA and now need to confirm those findings in large scale clinical trials.
- Dosing patients in the global phase III development program, which consists of two trials, one in acute coronary syndrome and one in secondary prevention has commenced.
If the trails are successful, TRA could be a transformational product for patients with atherothrombosis.
- With respect to the planned combination with Organon BioSciences, the firm has been able to raise nearly $9 billion in financing and has received the approval of the EU regulators for the deal.
- The company has completed a customary consultative process with the OBS Works Council in the Netherlands in a positive manner, which will facilitate the transaction with Akzo Nobel.
Portfolio Performance:
