Updated from 7:11 a.m. ESTSchering-Plough (SGP) swung to a fourth-quarter profit but missed Wall Street's targets Monday.
The Kenilworth, N.J., drug giant made $104 million, or 7 cents a share, for the quarter ended Dec. 31, reversing the year-ago loss of $856 million, or 58 cents a share, after a 55 cent charge related primarily to repatriating profits from overseas divisions.
Sales rose 6% from a year ago to $2.32 billion. Analysts surveyed by Thomson First Call were looking for an 8-cent profit on sales of $2.39 billion.
"We are moving from survive mode into thrive mode," said Fred Hassan, the chairman and CEO, adding that 2005 was a "pivotal year" in the company's turnaround efforts. He didn't provide guidance for 2006.
In morning trading, the stock was off 41 cents, or 2.1%, to $19.67.
Schering-Plough's results exclude the sales from the company's joint venture with
for the marketing of two cholesterol drugs, Zetia, developed by Schering-Plough, and Vytorin, a pill that combines Zetia and Merck's Zocor.
Assuming Schering-Plough gets half of the joint venture's net sales, the company's 2005 fourth-quarter revenue would have been $2.7 billion vs. $2.38 billion for the same period in 2004.
For the full year, excluding joint venture sales, Schering-Plough had a profit of $183 million, or 12 cents a share, on revenue of $9.51 billion vs. a loss of $981 million, or 67 cents a share, on revenue of $8.3 billion for 2004. If joint venture sales are included, the company's revenue in 2005 rose to $10.7 billion from $8.86 billion in 2004.
"No surprises in the quarter," Tim Anderson of Prudential Equity Group wrote in a brief research note Monday. He maintained his overweight rating. He doesn't own shares, and his firm doesn't have an investment banking relationship.
"Given the likely rapid, prolonged acceleration of earnings growth off of the low 2004 base, and the rapid uptake of Vytorin in the U.S., we believe investors will continue to be in intrigued with Schering-Plough's longer-term prospects," Anderson says.
Several analysts were intrigued with how Schering-Plough would respond to the recent announcement by Merck that it's working on another cholesterol drug that tries to raise so-called good cholesterol, much like Zetia and Vytorin do. But Hassan told analysts during a telephone conference call that he knows "very little" about the experimental Merck drug. However, he said he was pleased with the progress of their joint venture.
Merck said in December that it was working on MK-524A, an extended-release form of niacin that seeks to raise good cholesterol while also lowering triglycerides, a type of fat found in the blood.
sells a niacin-based drug called Niaspan as well as Advicor, which combines niacin and another drug that lowers so-called bad cholesterol. Merck also is working on MK-524B, which combines its experimental niacin with Zocor, a drug that reduces bad cholesterol.
Among its other products, Schering-Plough reported strong full-year sales in which four of its five biggest drugs posted gains of 24% or more vs. 2004. The biggest seller was Remicade, a multifaceted medication whose uses include rheumatoid arthritis, psoriasis and the gastrointestinal disorder Crohn's disease. Schering-Plough, which sells the drug outside the U.S. and Japan, reported a 26% gain to $942 million.
Sales of Peg-Intron for hepatitis C rose 33% to $751 million. Revenue from the nasal allergy spray Nasonex rose 24% to $737 million, and sales of the brain cancer drug Temodar gained 58% to $588 million. Sales of the antihistamine Clarinex dropped 7% to $646 million.
Hassan noted that the company's financial flexibility has increased thanks in part to the repatriation last year of $9.4 billion in profits from overseas subsidiaries. A federal law allowed companies to repatriate these profits at a sharply reduced tax rate.
"We have more financial headroom," said Hassan. Although his company will be "active" in looking for licensing deals and targeted acquisitions, "the financial discipline won't go away," he said.