Monday, February 2, 2009

Schering Announces Its 2008 Year-End Now Tomorrow -- I'll LIVE-Blog it.


Some UPDATED 02.03.09 facts, and questions:

Merck Conference Call now underway:

▲ Cowen & Co. Question: On Q3 call, you said you expected that about two-thirds of US formularies will not require advance approvals for any Vytorin/Zetia scrips? -- Answer: Yes; we still believe that is true, but it is down from 80 percent. Do you still expect Vytorin/Zetia growth in the US in 2009? Answer: We have seen a change in the use of the products, but we are hopeful that growth will return in the US, one day -- but maybe not 2009.

▲ Merck is guiding 2009 revenue to the lower-end of its earlier-projected ranges. This revenue-line weakness is clearly evident in Schering's results, and prospects, as well.



Schering Conference Call now underway:

▲ Carrie Cox said that Bridion/Sugammadex is launched in ten countries in Europe -- large government payers, hospital formularies -- just now starting to take hold. My sense: It will be slow going.

▲ Koestler: Asenapine rceived an FDA Class 2 Complete Response letter "clock start". . . .

▲ Jamie Rubin (JP Morgan) asked about Boceprevir timing: mid-2011 remains the Schering-announced "aspirational FDA filing date" -- well behind Vertexe's Teleprevir (See link).

▲ Seamus Fernandez (yes, the same Leerink Swann analyst!) asked about Proventil HSA pricing, then how will gross margin be affected by currencies -- what happens to inventory -- as the Q2 flows through. No expectation of ongoing conversion past first quarter (said Carrie Cox). CFO Bertolini pretty much dodged the question on gross marging/currencies.

▲ David Reisinger (B of A) asked about currency headwinds at the gross profit line: $240 million currency headwind, at the sales line, of which 30 percent fell to the bottom line. May vary quater to quarter.

▲ In response to a question, CEO Hassan said that Schering expects to build a psychiatrists' sales force for Asenapine (pricey!).

▲ Tim Anderson (Sanford Bernstein) asked about of Golimumab, first half of 2009? Koestler answered by year end. Vyotrin & Zetia, Carrie Cox said long-term, they are hopeful.

▲ Rupesh Patel (UBS) asked about PTP timing, SG&A and R&D (net of currency headwind): Bertonini said PTP is on-track, but not ahead of schedule on PTP; currencies affected R&D line by $70 to $80 million in the quarter, and affected SG&A by about $50 million.

~~~~~~~~~~~

▲ Sales of OTC consumer products fell 14 percent to $219 million, mainly due to inventory-stocking patterns that hurt over-the-counter sales of its Claritin allergy drug, said CFO Bertolini.

▲ Global Cholesterol Franchise revenues were off 24 percent, worldwide, in the fourth quarter of 2008.

▲ In the US, Vytorin/Zetia sales were off by 35 percent in the fourth quarter of 2008.

▲ CFO Bertolini expects continuing "currency headwind" through 2009 -- it reduced 2008 sales by 6 percent.

▲ The worldwide sales-revenue line miss was a very significant miss: $4.3 billion ACTUAL, as opposed to the EXPECTED $4.5 billion. The actual $4.3 billion included $1.3 billion in sales of products from the OBS acquisition and an unfavorable impact from foreign exchange of 6 percent. . . .

~~~~~~~~~~~~~~~

What to expect? Per this wire-story:

". . . .BY THE NUMBERS: Analysts polled by Thomson Financial expect, on average, earnings per share of 30 cents and revenue of $4.52 billion. In the year-earlier period the company lost $2.08 per share, on a charge for the $14.4 billion Organon purchase. Revenue was $3.72 billion.

In the PRIOR quarter, earnings per share fell to 24 cents per share, from 34 cents a share in the 2007 period. . . .

. . . .But the cholesterol joint venture represents half of Schering-Plough's profits, and sales of those drugs, Zetia and Vytorin, have been hammered for a year by reports questioning their efficacy and safety.

Ryan expects sales of both to be down a third or more in the fourth quarter, although earlier this month, the Food and Drug Administration said patients should not stop taking them or other other cholesterol-lowering drugs. Still, Ryan writes that the company "is no longer a growth story, but a cost-cutting one."

Credit Suisse analyst Catherine Arnold expects the company to end 2008 with a low tax rate, only in the mid- to high teens. . . .
"


Will SGP meet the lowered bar? Or will it miss it?

What do you think?

I'll also likely live-blog at least some of the Merck Earnings Call, same time tomorrow -- 8 am EST.

12 comments:

Anonymous said...

Want to comment?

"A Buyout Target?
Analysts who are aware of such a possibility, including health-care analyst Dr. Timothy Anderson of Sanford C. Bernstein (AB), don't think that such a deal is in the offing yet. Nonetheless, the idea has gained some currency on the Street, even though a takeover could be complicated by a joint venture Schering has with Merck (MRK) for the sale of two cholesterol drugs.

"There is a possibility that Schering-Plough will be acquired," says Anderson. "However, because of prior business arrangements, this may only occur if Johnson & Johnson (JNJ) and Merck were able to split up the company," says Anderson, with Merck buying out Schering's cholesterol-lowering drugs,

Through its joint venture with Merck, Schering gets part of the profits from two cholesterol drugs, Zetia and Vytorin. Zetia is a lipid-lowering agent that blocks the absorption of cholesterol in the intestine. Vytorin is a combination of Zetia and Merck's Zocor statin cholesterol agent. Schering took in profits of $2 billion in 2007 from the joint venture.

Even with these links, or maybe because of them, it's possible that J&J may bid outright to buy Schering, figures Anderson, who believes Schering could fetch a bid price higher than the targets (ranging from 20 to 23) that analysts have for the stock. In such an event, J&J may have to sell Schering's share of the cholesterol drug joint venture to Merck."


Cheers~

Condor said...

Hmmmmm -- I guuess Tim Anderson reads this blog:

". . . .this may only occur if Johnson & Johnson (JNJ) and Merck were able to split up the company," says Anderson. . . ."

This -- as I've repeatedly said, in the past -- the bust-up play -- is perhaps all that will ever become of Schering.

I think both JNJ and MRK are too smart to take on the manifold packets of woe Hassan and Cox have created here.

Later today, I'll report on the revival of a securities fraud suit at old Pharmacia (now Pfizer) -- when, as banditos, Cox and Hassan allegedly buried unfavorable study results to
juice the stock price. It looks like much the same drill as ALLEGEDLY occured with ENHANCE in 2007-2008.

But time will tell.

Anonymous said...

nicely put and I think you're right.

Thanks~!

Nathan said...

Funny that you are all to quick to point out bad news about Schering -- but you've been completely silent over the last 24-36 hours as thier stock price has shot up over 10% and analysts have repeatedly claims that Schering is a prime takeover target...


http://money.cnn.com/2009/02/03/news/companies/merck_schering.reut/index.htm?postversion=2009020310

Anonymous said...

a question to Nathan-

how is it good news for S/P for a merger?


The layoffs/downsizing would only complicate life for many at S/P.

Nathan said...

The good news is that the stock price is up and that revenue beat analyst expectations.

An aquisition is not good news for employees, but it certainly is different than what Condor thinks will happen. I have yet to witness any big-pharma bust-ups, as he proposes. It just doesn't happen...

Anonymous said...

nathan-

So, you're just interested in seeing the stock go up?

Nice, so you really don't care about the company just the $ you can make at the expense of the employees of S/P. Just like Fred and Carrie.

Makes someone wonder if you're one of the EMT at S/P.

Nathan said...

Quite the contrary. I'm a research scientist at a major pharma company. I have no stomach for these aquisitions. I might well end up loosing my job in the next year due to the Pfizer/Wyeth deal. I was just pointing out the irony of this website. It seems to celebrate when things go badly and exibits a complete lack of rejoicing when things go well. Just a bit strange...

I, for one, hope that SP remains independent and begins to thrive once again. But, given the turmoil of the industry at the moment, I doubt that this will happen. I think an aquisition is much more likely from what I've read.

condor said...

Nathan -- I hope you do NOT lose your job as a "research scientist".

Similarly, I do not "hope" that things will go badly for Schering-Plough.

I simply think it is being led by the wrong people. Consider the tenure of Fred and Carrie -- at Pharmacia, and now Schering, as proof of this.

So, what is ironic, to my eye -- is that you assign false motives to me -- when I have repeatedly made myself clear to you, at Ed's (the old pharmalot joint) -- in prior conversations.

If people like you, in Pharma, wish to keep their jobs, they ought to advocate for better leadership -- from the Board, and from the executive suite.

The drug industry's maladies are largely of these peoples' own making -- greed before science, profits before improved healthcare.

That's my take. If you disagree, great -- but your disagreement doesn't make me, in any way, internally incongruent.

Namaste

Anonymous said...

Condor,

As a return customer to your site, I have some qualifiers for/on your statements to Nathan:

1) Pharma is a business. Its business is to make money. It happens to be in health care. (Yes, they can be more compassionate but, it is still a business)
2) Management (and this includes the Board) have to maximize profits. This tends to lead to science directed for only big targets or me too drugs (and policies of reduction in staff.
3) A bit of the problem really does fall back to Wall Street and the American public. They don't want a company to be just productive (gone are the days when a company could trod along with a 5% return), the company needs to give 'large returns' on their stock (it my opinion this all start after the tech boom). I think this pressure is what really pushes on the direction of the company.

IMHO

Condor said...

Fair enough -- thanks for the perspective.

So we are clear -- I too am a capitalist! -- I want science to be (significantly) life-improving, AND profitable.

But it cannot be solely about profits, for in the end, pharma sells an entirely "opaque" good -- we must trust the maker, in some measure, about whether it is helping -- or hurting -- us.

Namaste

Anonymous said...

We agree.

Trust but.......verify.

"In God we trust....all else, prove it!"