Schering-Plough 3Q Profit Up on Gains

MOUNT LAUREL — Profit more than doubled for Schering-Plough Corp., but the drugmaker's performance without one-time gains fell shy of Wall Street expectations and its shares skidded more than 13 percent.

The Kenilworth-based company said Monday that with a major acquisition expected to close by the end of the year and some potentially blockbuster drugs getting close to approval, sales are expected to keep growing but so are expenses.

For the quarter ended Sept. 30, net income after paying preferred dividends rose to $713 million, or 45 cents per share, from $287 million, or 19 cents per share, a year ago.

But excluding $294 million of acquisition-related gains and a $20 million upfront research and development payment, the company would have earned 28 cents per share in the latest quarter.

Revenue climbed 9 percent to $2.81 billion from $2.57 billion a year ago.

Analysts surveyed by Thomson Financial expected a profit of 30 cents per share on revenue of $2.87 billion. The earnings estimate typically excludes one-time items.

Its shares fell $4.46, or 13.6 percent, to $28.25 in morning trading Monday.

With about 60 percent of its revenue generated by drugs sold abroad, Schering-Plough said the weaker dollar helped push revenue up 3 percent year-over-year. Adjusted to include results of its cholesterol joint venture with Merck & Co. for the drugs Zetia and Vytorin, revenue would have totaled $3.5 billion, up from $3.1 billion a year earlier.

Fred Hassan, the chairman and CEO of the company, said cholesterol drugs should sell even more since cholesterol target levels keep being lowered.

"The lower-is-better story continues," Hassan said.

Hassan said the company is doing well in its efforts to be more aggressive with developing drugs. Having a strong pipeline is key for drug companies, which are constantly losing sales to generic brands as patent protections expire.

Key drugs in the company's pipeline now include one for HIV and one for atherothrombosis, a blood vessel disease that can lead to strokes and heart attacks. Both have been granted "fast track" designation for approval by the U.S. Food and Drug Administration.

While developing new products can lead to higher sales, Hassan said he also expects more spending in the coming year on research and development and drug promotion.

For the first nine months of the year, Schering-Plough earned $1.77 billion or $1.15 per share, up from $875 million, or 59 cents a share, for the same period last year. Sales in the first nine months this year were $8.96 billion, up 12.8 percent from $7.94 billion a year ago.

Schering-Plough also said that it has made "significant progress" toward completing its acquisition of Organon BioSciences from Amsterdam-based Akzo Nobel, including getting European Commission approval. The company said it expects the $15 billion sale to be completed by the end of 2007.

Hassan said that by the next quarterly earnings report, Schering-Plough will be a larger company with a new line of products in development.

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On the Net: http://www.scheringplough.com

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