[UPDATED -- 05.29.08 AM: The Insider -- across the pond -- at Pharmagossip has featured my graphic (below), and linked us, for the story, on it! Cool! Very, very!
Earlier, we added new screen-capture graphics; additional links.]
The newest Monthly Vytorin/Zetia IMS scrips were just released (mostly sub-rosa) by Schering-Plough, on a back-water page of its website -- no front page reference, link or mention. And, still no related SEC filing yet [Form 8-K filed on 05.29.08 AM -- But still not even LINKED on the "Investor Relations" sub-page at Schering-Plough(see this morning's screen-capture, below, right!)]. Sir Ed (he, of Pharmalot) badgered 'em into disclosing it, tonight, I think -- Kudos! "Those sneaky lil' devils." Heh. Take a look (Source: IMS National Prescription Audit Plus (NPA+), as of May 14, 2008 -- (in Thousands) -- Click to enlarge):
So -- the overall Cholesterol Franchise has fallen off dramatically in April 2008 --from a January 31, 2008 scrips level of 3,205, to a April 30, 2008 level of 2,492, or a 22.25 percent decline in three months. Let us, conservatively, I think, assume that it gets no worse than this -- off about 22 percent for the full-year 2008.
Let us fairly surmise that even post-Organon, about 60 percent of all of Schering's profitability is delivered from this franchise's equity income line (note: not sales -- income, net income). That 22.25 percent decline then, becomes a 13.35 percent decline in Schering-Plough's profits, overall (or, 60 percent of 22.25 percent).
On January 31, 2008, Schering-Plough Common Stock closed at $19.46 per share. There were slight increases in IMS scrips data in March, over February, but now "the cat is fully out of the bag" -- as of April 30, 2008, we have seen one full 
month, post-ACC (the American College of Cardiologists' ENHANCE conference panel discussion was held on Sunday March 30, 2008).
A 13.35 percent decline from $19.46 yields. . . . Yep: $16.86 per share.
That is SGP's fair value, tonight, and pre-market-open tomorrow, if we assume the market has correctly assessed all the other business-lines of Schering-Plough. And if we assume no more materially bad Schering news, for the balance of 2008. Remember though, those other business lines are/were depending on Vytorin/Zetia cash flow to help fund growth in the other projects and initiatives. In some measure, the $1.5 billion PTP charge, over four years -- outlined in only the most vague of terms -- by Mr. Hassan, should address some (perhaps 60 percent) of this, during 2008. But that still leaves a Schering cash-flow shortfall for 2008. How big is that shortfall? No one outside of Building K-1 really knows. [And I doubt they'll tell us.]
Now, consider that tonight -- May 28, 2008 -- Schering closed at $20.09 per share -- by my lights, that is about $3.25 per share above its "fair value", tomorrow, given the above news. Schering is simply over-valued.
Thus, once all the dust settles (circa December 2008), I believe the December 2008 fair value, considering the hampered flexibility (due to decreased year-over-year cash-flow), will be closer to $16, than $17.
For my money, this stock is simply overpriced -- at anything over $17.
You read it here first.
Wednesday, May 28, 2008
Why Schering-Plough Common Stock is Fairly Valued at About $16 to $17 per Share, as of Tomorrow. . . .
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Some good, solid skepticism at Pharmalot's comment page, on this topic, has led me to another path -- with the same $16 to $17 result -- do take a look:
. . . .The 10-Q for March 31, 2008 tells us:
“As of March 2008, total combined prescription share for VYTORIN and ZETIA in the U.S. was down approximately three market share points versus December 2007 from 16.9 percent to 14.2 percent. . . .” They also tell us “additional declines occured in April 2008.”
Ed has shown us those, tonight.
Take 16.9 percent (December 31, 2007 share), and subtract 7.2 percent (April 30, 2008 share). The decline is 9.7 share points for the FOUR months, or about a 59.9 percentage loss of share.
So let’s call it a 60 percent decline. Now, multiply the 60 percent times (.6), or the amount it affects overall Schering profits, very conservatively assuming that all other Schering businesses feel no impact from the fall-offs in Vytorin/Zetia 2008 cash flows. Overall profits are thus very-likely to be down 36 percent at Schering in 2008 v. 2007, even if not a single additional bad thing happens in 2008 to the company. Said another way, 64 percent of the December 2007 stock price would be fair value.
Stock price in December? — Let’s pick, say, December 20 (about the average for the month):
Yep — $26.02.
$26.02 times .64 equals. . . . Yep: $16.65.
Dead in the middle of the $16 to $17 range I’ve called.
Make a liar of me. Seriously, I mean that in the sense of rigorous scientific inquiry.
I really would like to see what I’ve missed — but please don’t tell me the NEW APRIL IMS MONTHLY numbers are “priced into” the stock. That defies logic.
Other than us here assembled — lit by the eerie-glows of our monitors (and a few IR wonks at Schering!) no one KNOWS they exist, yet. They were not even released to the SEC tonight. Just ask Ed.
That will all happen tomorrow.
Then we will see.
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