U P D A T E D: 04.21.09
Earnings Released @ 6:27 AM EDT
The Q1 Earnings Call is
LIVE NOW -- click in -- no
LATER: Here's a Link
to the MERCK call.
▲ FINAL LIVE ENTRY: Schering-Plough opened off about 5 percent on the NYSE; Merck opened down almost $2, or off 7.5 percent. Tough, tough times.
▲ LATER: Schering-Plough common stock is off about 3 percent in light trading on the NASDAQ pre-market. . . .
▲ LATER: Merck takes an icy "no comment" on the J&J Remicade matter -- now Merck is off a buck in NASDAQ pre-market (about 100,000 shares traded). . . .
▲ LATER STILL: Merck CEO Clark just confirmed that later this year, IMPROVE-IT data will be reviewed (but not "unblinded") to decide whether the sample size will need to be increased -- read: a multi-year delay, for new enrollments, and then subsequently, any results. [Which, of course, would be the sort of analysis Senator Grassley's staff conducted on the ENHANCE data, last Spring, on the fly, to determine that no favorable outcome was possible, simply by analyzing the "blinded" data. This is known as "functional unblinding".]
▲ Global sales of Vytorin/Zetia Q1 2009 down over 15 percent, overall -- in sequential quarterly comparisons (Q4 2008 v. Q1 2009). That is NOTHING like "generally stabilizing" sales.
▲ Q1 2009 US cholesterol franchise (see page 5 of that link): $596 million, v. $695 million in Q4 2008. That's a US sales down-bubble, in sequential quarters, of 14.2 percent. That also is NOTHING like "generally stabilizing" sales.
▲ "Net sales of the cholesterol franchise, which include sales of the cholesterol joint venture plus sales recorded by Schering-Plough in non-joint venture territories such as Japan and Latin America, declined 21 percent in the first quarter of 2009 [Ed. Note: as compared to Q1 2008] to $973 million, reflecting a 17 percent operational decrease and a 4 percent unfavorable impact from foreign exchange. Sales declined 30 percent in the U.S. In international markets, sales declined 2 percent, reflecting operational growth of 11 percent and a 13 percent unfavorable impact from foreign exchange. . . ." That, also, is NOTHING like "generally stabilizing" sales.
▲ Let those three dot points sink in a moment: On January 20, and February 3, 2009, CEO Hassan told the world that the cholesterol franchise sales decline had "generally stabilized" -- and he would no longer report monthly IMS data -- as a way of informing the equity markets, in a more timely fashion, of what Schering's prospects might hold. On March 9, 2009 he announced the proposed reverse merger, which was pegged off of Merck and Schering stock prices.
▲ What would those figures have been, on March 9, 2009, had the equity markets seen February 2009 Monthly IMS Data? What would have been the price, had the equity markets known of this continuing monthly deterioration in the the sales revenue, and thus fortunes, of Vytorin/Zetia? A deterioration that Mr. Hassan had said, a month earlier, was ending. Remember, Mr. Hassan did not stop receiving the IMS monthly updates -- he just stopped disclosing them. I think the class-action securities lawyers/plaintiffs will smell new blood, in these waters, this morning.
▲ Currency created a 10 percent drag on Q1 2009 sales revenue, overall. That is in line with the headwinds Abbott reported last week.
▲ GAAP Q1 2009 EPS of $0.46 -- misses by one penny. Yawn.
▲ Also as required by GAAP, the increase in common stock prices -- from the announcement of the proposed reverse merger on March 9, 2009 -- has caused the mandatory convertible preferred (convert date: August 2010), (SGP-PB) to be considered dilutive for the purpose of calculating EPS -- so, instead of about 1.635 billion common share equivalents (@ Q4 2008), Schering now has to spread its earnings over 1.739 billion common share equivalents, or more than an additional 100 million common shares. This is bad news, albeit GAAP-rule-driven-news, as well.
▲ Meanwhile, over at Whitehouse Station, WSJ MarketWatch reports thus, this morning: ". . . .Merck & Co. cut its 2009 revenue view and delayed the filing of a migraine drug as it reported a 56% decline in first-quarter profit. Its first-quarter net dropped to $1.46 billion, or 67 cents a share, and sales fell 8% to $5.39 billion. Currency swings and the loss of exclusivity of Fosamax hurt sales, and the year-ago profit featured a $1.4 billion gain on a distribution from AstraZeneca. Excluding one-time items, Merck said it would have earned 74 cents a share against 89 cents a share. Analysts polled by FactSet had forecast earnings of 78 cents a share. It still sees adjusted earnings between $3.15 and $3.30 for the year, but cut its revenue view by $500 million to $23.2 billion. Merck said it is delaying the filing of the U.S. application for telcagepant, used to treat acute migraines, and said it doesn't expect a filing this year. . . ." Ouch.
▲ Merck shares are now off -- over 3 percent -- in NASDAQ pre-market trading (albeit on light volume, so far).
▲ Schering-Plough is off, albeit only marginally, in NASDAQ premarket trading -- and again, on light volumes.
Now, Blogging the Call
▲ CEO Hassan admits that there is "continuing pressure" in the United States on Vytorin/Zetia. That is an astonishing understatement.
▲ Raul Kohan is reviewing the Animal Health businesses. [Is he setting these up for divestiture? Or, will it be Merck's animal health businesses -- that are off-loaded? We'll see.]
▲ CEO Hassan: No news from FDA on asenapine -- "continuing to work" with FDA.
▲ Canadian Health's recent approval of Simponi glowingly-mentioned by Hassan, and by Carrie Cox, as well.
▲ Carrie Cox just spent over a minute on the international positives for Vytorin/Zetia -- and then offered only about 10 seconds on scrips-decline (30 percent!) in the US -- clearly, the $900 million quarterly elephant in the room.
▲ Tim Anderson, Sanford Bernstein, asks about Simponi: Tom Koestler said that the European registration is 12 to 18 months away from approval -- Carrie Cox said that they are still working through the Canadian reimbursement process -- sales will be later in the year.
▲ Rupesh Patel, UBS, is asking for a "line by line" analysis of currencies headwind -- now Bob Bertolini is basically saying it affected everything, adversely.
▲ New analyst at Morgan Stanley: asks about EPO in clinical trials, vis-a-vis Boceprevir. . . .
▲ Goldman Sachs [Name?] asks about European pressure on Remicade reimbursement -- is there the same pressure we're seeing in the US? Carrie Cox said in Eurpoe, it is viewed more as an "in-hospital" drug -- which militates against some of the cost pressures, on reimbursement in the EU.
▲ "No predictions" on timing for any potential resolution of the Congressional investigations of the ENHANCE and related matters, from Tom Koestler.
▲ Seamus Fernadez, Leerik Swann -- questions on timing of any merger vote, given Merck's tough quarter: CEO Fred Hassan no update on any potential merger vote date -- Annual Stockholders' Meeting in May 2009 is next. Tom Sabatino: merger proxies will likely be filed with the SEC toward the end of May 2009.
▲ For its part, Merck's press release this morning offered: "Merck said it has made the appropriate filings with regard to the Hart-Scott-Rodino Antitrust Improvements Act of 1976. . . ."
▲ How is "prior authorization" playing out on Vytorin/Zetia in the US? Carrie Cox offered a commercial, on lowering LDL. Then she admits to substantial generic inroads.
▲ Dick Clark, over at Merck, is now confirming, on his call, that Merck's Form S-4 will file with the SEC toward the end of May 2009 -- saying the "financials" [did he mean "financings"?] are complete, and bank syndication is in place, in principle -- in short, things are "on track".
Tomorrow morning at 7:30 am EDT, before the NYSE opens, I'll be live-blogging the Schering-Plough first quarter 2009 earnings conference call -- we may well learn more about where the Remicade/Simponi rights stand, vis-a-vis Johnson & Johnson.
Later, FoxBusiness intones that ". . . .Schering-Plough is expected to report first-quarter earnings of 47 cents a share, according to analysts surveyed by FactSet Research. . . ."
This link should anchor directly to a log-in for a Windows Media feed of the call on Tuesday.
What to watch for: On February 3, 2009, CEO Fred Hassan told Wall Street, on the 2008 Year-End Results call (reiterating an "Investor FAQ" dated January 20, 2009) that Vytorin/Zetia sales had "generally stabilized" -- and thus he would no longer provide monthly IMS prescription data updates for the cholesterol franchise.
If the franchise's sales are down more than 10 percent, tomorrow, in sequential quarters, Wall Street ought to cry foul -- loud and long.
Where It Stood -- At Year End
On February 2, 2009, the press release pegged Schering's worldwide share of the Vytorin/Zetia revenue in Q4 2008 at $531 million, while it totaled $1.1 billion, worldwide, which included Merck's half of the sales.
The IMS scrips for Q4 2008, listed in the "Investor FAQs" were as follows:
US Cholesterol Market: 61,149,000
Merck/Schering-Plough Franchise: 6,317,000 scrips; Schering's US share: $695 million
Vytorin: 3,466,000 scrips; Schering's US share: $357 million
Zetia: 2,850,000 scrips; Schering's US share: $338 million
[The US$ of Q4 2008 revenue figures immediately above are from page 5 of these Schering product sales sheets.]
How will Q1 2009 stack up? We'll know in about 12 hours.