This is a summary of the second quarter fiscal 2008 earnings call conducted by Schering Plough Corp. (SGP: chart) on July 22, 2008.
Management:
Chairman and CEO: Fred Hassan
EVP and CFO: Robert J. Bertolini
EVP and President, Global Pharmaceuticals: Carrie S. Cox
VP of IR: Janet Barth
Key Investor Issues:
- Profit fell to $398 million, or 24 cents per share, from $517 million, or 34 cents per share, in the prior-year period.
- Sales rose 55% to $4.92 billion from $3.18 billion.
- The company’s Productivity Transformation Program started in April 2008 is expected to realize savings of 10% or $1.5 billion of its 2007 cost base by the end of 2012.
Second Quarter Highlights:
Positive results in the second quarter reflect the company’s ongoing efforts to manage the challenges in its business.
In addition, the company is harnessing the potential of its strategic OBS acquisition. On a reconcile basis, Schering Plough earned $0.45 per share in the second quarter. Consistent with the first quarter, this amount excludes purchase accounting adjustments, and special and acquisition-related charges. It also excludes income from the termination of the respiratory joint-venture with Merck.
On a GAAP basis, net sales increased to $4.9 billion and include about $1.4 billion in sales from OBS.
Excluding OBS sales, nets sales for Schering-Plough on a standalone basis would have been $3.5 billion, an increase of more than 9% compared to the prior year. Currency was again favorable this quarter, contributing an estimated 7.6% to the Schering-Plough standalone sales growth.
- If 50% contribution from the cholesterol joint-venture was included, adjusted net sales were $5.5 billion this quarter.
- Global sales of the cholesterol franchise were down about 10% compared to the prior year period, with a 26% on the US, offsetting continued growth in other markets.
- Outside of United States, cholesterol franchise sales increased 37% to about $450 million in the second quarter.
Overall, prescription pharma sales this quarter benefited from three key factors:
- about $920 million in sales from Organon, including contributions from NUVARING and FOLLISTIM;
- solid growth REMICADE and TEMODAR;
- Schering Plough benefited from currency.
The US prescription market continues to be challenging across the industry.
Schering Plough business diversity has strengthened, with about 25% of the reported sales this quarter coming from animal health and consumer health care businesses.
Animal Health second quarter sales were $818 million including more than $520 million from the acquired OBS, Animal Health business. Schering Plough product portfolio within animal health can be grouped into two main categories: Biologics and Pharmaceuticals. This quarter, sales were roughly split evenly between the two groups.
In Biologics Schering Plough is a market-leading vaccine producer.
Just this quarter, the company launched a new vaccine for the treatment of bluetongue disease. This disease primarily affects cow and sheep in Europe. The other animal health products consist of a wide range of pharmaceuticals such as anti-infectives, anti-inflammatories and antiparasitics.
Consumer Health Care sales were about $400 million.
- MiraLAX led the growth this quarter, with sales of $28 million.
- Sun Care and Foot Care also contributed to growth.
- OTC CLARITIN sales were unfavorably impacted by the timing of shipments, a less severe allergy season and increasing competition.
