The Wall Street Journal-20080213-Schering-Plough Posts Loss on Acquisition Charges
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Schering-Plough Posts Loss on Acquisition Charges
Full Text (518 words)Schering-Plough Corp. swung to a fourth-quarter loss on big acquisition charges and indicated it was ready to take "tough actions" if sales of its cholesterol drugs decline substantially.
The Kenilworth, N.J., drug maker is grappling with a decline in prescriptions for cholesterol drugs Vytorin and Zetia after a study released last month showed Vytorin was no better than a generic drug at slowing artery clogging, despite reducing bad cholesterol more. Schering-Plough has a joint venture with Merck & Co. that markets Vytorin and Zetia.
"Regarding the impact on our business going forward, basically it's too early to tell," Schering-Plough Chief Executive Fred Hassan said. He added that prescription trends appear to have stabilized more recently.
Mr. Hassan said the company would monitor prescription trends closely. "We'll make appropriate decisions as we see this matter unfold, to do what is right for the long-term performance of the company," he said. "We stand ready to take tough actions if tough actions are needed."
Asked later what he meant by tough actions, Mr. Hassan said in an interview that "we're going to look at every part of the company to be more productive." He said it was "too early to speculate on" whether a worsening of Vytorin trends would lead to job cuts.
Mr. Hassan and his lieutenants defended the cholesterol drugs, saying the study released last month has been mischaracterized in the media. The full results of the study are scheduled to be released at a medical meeting in March.
Schering-Plough shares rose $1.21, or 5.9%, to $21.83 in New York Stock Exchange composite trading at 4 p.m. yesterday. Before yesterday, Schering-Plough shares had fallen more than 25% since the negative Vytorin study was released.
Publicity surrounding the study caused prescriptions for Vytorin and Zetia to plummet in the ensuing weeks, although they appear to have stabilized more recently. The companies have stressed that Vytorin and Zetia remain effective for the Food and Drug Administration-approved use of reducing bad cholesterol. Whether that translates into reduced risk for heart attack and cardiovascular disease hasn't yet been proven; a large study designed to test this is expected to be completed in 2011.
The company's fourth-quarter results included charges related to the November acquisition of Organon from Akzo Nobel NV for 11 billion euros ($16 billion at current exchange rates), including a $3.75 billion in-process research-and-development charge.
Schering-Plough said global sales at its cholesterol-drug joint venture with Merck rose about 33% to $1.44 billion for the quarter. Neither company records revenue from the venture under accounting rules, but each records profits as equity income. Schering-Plough's equity income for the fourth quarter totaled $556 million, up 40% from a year earlier.
Members of Congress and state officials are investigating the companies' handling of the Enhance study, including whether executives knew the results were negative long before they were publicly released. The companies have defended their handling of the study, saying it was complex and required time-consuming analysis.
In its news release, Schering-Plough said that "the pharmaceutical industry continues to be subject to ever-more critical scrutiny, where events can be mischaracterized and drive amplified reactions."
