American Home, Schering-Plough Both Match Forecasts
Updated from 9:10 a.m. EST
Two pharmaceuticals firms that have lately been distracted from their primary mission of selling drugs posted generally solid earnings Thursday. That could be where the similarities between them end, though.
American Home Products (AHP), which recently resolved litigation over its diet drugs, posted improved net income for the quarter and year based on strong prescription drug sales. The company also said it was on track for double-digit earnings and revenue gains in 2002.
Schering-Plough (SGP), on the other hand, has yet to resolve expensive regulatory problems involving its manufacturing plants. Excluding a $500 million charge to cover potential government fines for the manufacturing issues, the company reported a drop in net income for the quarter and year. And while Schering is looking for earnings growth in the "low double digits" in 2002, it said that will depend on the launch of approved drug Clarinex and reaching a consent decree with the Food and Drug Administration.Late in Thursday's session, American Home was trading down 29 cents, or 0.5%, at $64.20, while Schering-Plough was down 36 cents, or 1%, at $33.50.
Home FreeAmerican Home noted that its legal settlement with thousands of former users of fen-phen, a diet cocktail containing two drugs that was recalled in 1997 due to safety concerns, received final legal approval on Jan. 3. After running up more than $13 billion in charges for the litigation, the company said it didn't expect to incur any more costs in the matter. "Based on current information, we feel that the reserve is adequate to cover diet-drug liability," a company spokesman said. The company wants a fresh start, to the extent that it is changing its name to Wyeth. But even despite its legal troubles, AHP fared well in 2001 relative to its peers. A rush of patent expirations in the industry has ushered in a wave of competition from lower-priced generics. And while a record number of drugs are in the early testing stages, few top sellers have come to market since the middle of 1999.
Rough SleddingIn the meantime, storm clouds still hang over Schering-Plough's future. Whether the company will in fact be fined $500 million for the quality control problems at its manufacturing plants couldn't be confirmed by the company or the Food and Drug Administration, as negotiations are ongoing. The company also declined to comment on how much it spent to upgrade plants last year and how much more would need to be done. Total capital outlays for 2001 totaled $750 million, which includes work on these facilities as well as other projects worldwide. "We have done a lot of work, and significant progress has been made, but we would recognize that additional work needs to be done. How these issues will be resolved will be the subject of any agreement with the FDA," said a company spokesman. In its release, the company said that low double-digit earnings growth in 2002 remains subject to a number of factors, including "possible impact on product shipments as the company continues to implement enhancements to manufacturing operations," as well as the timing and impact of a consent decree. Those targets are also dependent upon the success of its U.S. launch of Clarinex, which has received FDA approval, and potential trade inventory reductions of an important revenue-generating drug, Claritin, the company said. Schering-Plough said full-year earnings per share, excluding the $500 million charge, fell 8% to 36 cents in 2001, on net income of $528 million. Including the charge, fourth-quarter diluted earnings per share declined 74% to 10 cents on net income of $143 million. Worldwide pharmaceutical sales of $8.4 billion for the full-year 2001 were flat compared with the 2000 period and up 2% when foreign exchange is excluded.
Check Out Our Best Services for Investors
Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts
Check Out Our Best Services for Investors
David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
Every recommendation goes through 3 layers of intense scrutinyquantitative, fundamental and technical analysisto maximize profit potential and minimize risk.
Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.