Updated from 7:52 a.m. ET

Schering-Plough

(SGP)

is getting socked on news that a

Food and Drug Administration

probe into the company's manufacturing processes and quality control is hurting sales.

The Madison, N.J., pharmaceuticals company said earnings for the first quarter will be as much as 15% lower than the 42 cents it earned in the year-ago period. Sixteen analysts polled by

First Call/Thomson Financial

are calling for the company to earn 48 cents in the first quarter. Wall Street is expecting $1.90 for the year.

The shares were lately off $7.77, or 16.1%, to $40.55 in morning trading on the

New York Stock Exchange

after getting pummeled in

Instinet

action before the regular session opened.

Merrill Lynch

,

Credit Suisse First Boston

and

Lehman Brothers

all cut their ratings or estimates on Schering-Plough this morning.

Schering-Plough, which made the announcement after the closing bell Thursday, said the FDA identified "deficiencies concerning compliance with current good manufacturing practices" at two of its plants in New Jersey and one in Puerto Rico. The company said the citations and the installation of system upgrades needed to meet compliance have interrupted production. The company will spend more than $50 million to fix the problems.

The drug maker, which said it has also increased quality-control and compliance staff, didn't say how much the difficulties would hurt annual sales and earnings, or when the production problems would be resolved.

Schering-Plough couldn't be reached for comment, but said in a recorded phone message: "As noted in the release, Schering-Plough is confident that all prescription and OTC products currently in the marketplace are safe and effective. The needs of patients will be met."

"We believe it will be more than another quarter that their problems will continue, and their sales and earnings will be affected,"

A.G. Edwards

analyst Ken Nover said. Nover, whose firm doesn't do any underwriting for Schering-Plough, said he has lowered his full-year 2001 EPS estimate to $1.53 from $1.87 and cut his revenue estimate to $9.7 billion from $10.7 billion.

The plants under investigation are major suppliers of the company's products in the U.S., including its blockbuster antihistamine, Claritin. Schering-Plough said the supply of Claritin wouldn't be affected. Nevertheless, the company said it has to solve the production problems before the FDA will give it approval for the production of Clarinex, a new antihistamine the company hopes to sell once its exclusive right to market Claritin expires in 2002.

Sepracor

(SEPR)

, which licenses Claritin to Schering and is also working with the company on Clarinex, lately dropped $5.50, or 8.5%, to $59.38 in trading on the

Nasdaq

.

"We think that Claritin is involved, and we believe that their second largest franchise, Intron A/Rebetol, is not affected," Nover said. "We're also assuming that all problems will be fixed this year."