Q3 Live-Blog: Profit DOWN 17 percent; Currencies Take ANOTHER 10 Percent Out of Schering-Plough's Sales Growth

This will go active at about 7 a.m. (EDT), this morning.

▲ On the NASDAQ Pre-Market electronic trading screens, Merck is trading into the $33 range, up almost a buck, on decent volume -- while Schering is off, marginally (likely being supported by Merck), in the same NASDAQ premarket trading system. . . .

▲ ". . . .Merck said it is reaffirming its guidance for full-year 2009 revenue (as reported by Merck & Co., Inc.) of $23.2 billion to $23.7 billion. . . ."

▲ ". . . .All of the 2009 guidance provided by the company excludes contributions from Schering-Plough that would result from the merger and any costs incurred upon closing of the merger, which is expected to occur in the fourth quarter. Therefore, Merck's standalone 2009 guidance will no longer be applicable once the merger closes. . . ."

▲ Merck indicates its year-end 2009 numbers will be available later than usual (week two of February, 2010 -- not January 2010), if the merger closes in Q4 2009, thus: ". . .Given the anticipated fourth quarter close of the merger with Schering-Plough, Merck expects to announce the combined company's fourth quarter and full-year 2009 sales and earnings during the second week of February, and to provide 2010 guidance around the time of its first quarter 2010 sales and earnings announcement. . . ."

▲ I'll only dip into the Merck call and release, as it seems mostly in-line.

▲ Switching to Merck's release now: $2.8 billion gain on the sale of the Merck's interest in Merial. . . that's a nice deal -- a sweet amount of gain!

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▲ Look for Schering-Plough to fall significantly at NYSE opening bell.

▲ Reuters' Matthew Goldstein has it thus: "Schering-Plough, slated to be acquired this year by larger U.S. drugmaker Merck & Co, said on Thursday its third-quarter profit fell on waning demand for cholesterol drugs it sells with Merck. . . ."

▲ CEO Hassan (is nothing, if not predictable, as he) repeatedly called Schering-Plough "the engine" that would power Merck's "growth" -- odd metaphor, given that Schering's EPS is down 17 percent this quarter; and Merck is meeting (or beating) its guidance this morning.

▲ Schering-Plough call is ending -- Fred saying good-byes -- is this the last time CEO Hassan will host such a call, for a public company? We shall see, but I'd bet it is.

▲ Merck's Q3 release is now out. No huge surprises -- thus Merck's call will only be a half hour.

▲ Seamus Fernandez, of Leerink, Swann -- where are we on enrollment in TRA study; and IMPROVE-IT -- will there be a futility analysis? Tom Koestler says TRA should complete enrollment soon. And now, no answer on the futility analysis. Tom tells him to read the paper on IMPROVE-IT.

▲ 15,000 patients in IMPROVE-IT -- still no half-way analysis yet, maybe sometime next year (2010).

▲ Chris Schott, of JP Morgan -- what does currency look like for Q4 -- CEO Hassan says it should be "good for overseas business"(?) -- what is CEO Hassan looking at???

▲ Catherine Arnold at Credit Suisse with pipeline questions.

▲ Jami Rubin, Goldman Sachs -- Cholesterol Equity Income is now "below expectations" -- and looks like "continuing erosion". A dodge, as an answer -- but ultimately Bob Bertolini admitted that "top-line" declines are continuing, even as (controllable) spend for promotion has decreased significantly.

▲ Tim Anderson of Sanford, Bernstein -- What is timeline for FDA's cholesterol franchise pronouncement -- is it waiting for Arbiter 6 - HALTS outcome? Tom Koestler -- we don't know where FDA is on any of this -- we at Kenilworth are still waiting to hear, but we don't think Arbiter 6 is the driver.

▲ Q & A now underway. . . .

▲ Note that EPS -- on a GAAP basis, now, was only 29 cents; but after all these "adjustments" -- it is reported as 40 cents a share by Kenilworth, or a 38 percent variance in EPS in Q3 2009 -- driven solely by items within Schering-Plough's control.

▲ With all the moving parts in all of Schering-Plough's various ongoing "special" charges, and the fact that it will likely never have to reconcile these Q3 2009 figures as a stand-alone company, next year (as all of this -- all of Old Schering -- will be an "as acquired" adjustment line on the "New" Merck statements), it is anyone's guess as to whether any of the items below the sales line will be objectively-verifiable, by mid 2010.

▲ Conference call is now underway.

▲ Note that most Schering drug franchises with significant overseas sales posted 12 percent currency-driven declines (headwinds), which were only partially offset (4 percent or so) by increasing US sales. This is a tough currency environment -- especially as Merck will want to highlight the "diversification" Schering's international sales bering to the historically-US dominated Merck sales lines.

▲ In the US, Vytorin and Zetia sales have declined another 10 percent. That is the opposite of "generally stabilizing" -- as we are now seeing a steady, stable 10 percent DOWN-bubble, in the US sales.

▲ Together, these charges hold over $1.7 billion, for the two nine-months periods ending September 30, 2009, and 2008.

▲ There are at least three distinct "canopic jars" into which Schering-Plough could be pouring some otherwise "ordinary, recurring" expenses -- and treating them as "non-recurring, special" items, including: (1) an Organon assimilation charge (begun in November of 2007; still ongoing); (2) the so-called PTP restructuring charge (begun in April of 2008; still ongoing); and (3) now the Merck reverse merger charges (begun in March of 2009).

▲ Okay -- so the Schering-Plough Q3 earnings release is out; and it reports essentially flat worldwide sales. But there is no way to know much beyond that. Why? Because Schering-Plough has booked about $400 million in 2009, and over $1.3 billion in 2008, in "special, merger and related restructuring charges" for the nine months ended September 30, 2009. There are at least three distinct "canopic jars" -- more in next dot point.

▲ I'll go live, at about 7 a.m. (EDT), do stop back. . . .

▲ At approximately 7:15 a.m. (EDT), Schering-Plough will conduct a conference call to review results for the 2009 third quarter. . . .

▲ At approximately 9:00 a.m. (EDT), Merck will conduct a conference call to review results for the 2009 third quarter. . . .