Strong Financial Performance Driven By Strength and Diversity on Many Fronts; Productivity Transformation Taking Hold
"Our performance this quarter again demonstrates the strength of our long-term strategies and our ability to execute on them," said
Hassan added, "Now with almost one year of experience, we are seeing that the acquisition of Organon BioSciences (OBS) is resulting in a powerful combination. This integration is creating new product strength, new geographic strength, new strength with our customers and new R&D strength - including a late-stage pipeline that is now one of the strongest in our industry."
For the 2008 third quarter, Schering-Plough reported net income available to common shareholders of
GAAP net sales for the 2008 third quarter totaled
Commenting on third quarter results, Hassan said, "While the U.S. market remained difficult, we continued to take advantage of our growing international presence and opportunities." Approximately 70 percent of Schering-Plough's 2008 third quarter GAAP net sales were generated outside
"Importantly, our company continued to generate good cash flow in the third quarter, paid off additional debt and still increased cash balances," Hassan noted.
As a result of actions during the last five years, Hassan said that the company is now "particularly well positioned" for the following reasons:
-- Broad diversification in geographic markets and businesses, with the consumer and animal health segments together generating about 23 percent of GAAP net sales; -- Relatively long period of expected market exclusivity for key prescription products, affording protection well into the next decade; -- Robust research pipeline, with 10 projects in Phase III; -- Near-term opportunities, including the biologic golimumab, filed in the EU; sugammadex, now being launched as BRIDION in EU countries; and asenapine, under U.S. regulatory review; and -- Sound financial management, with rigorous cost controls in place to reduce costs and improve efficiencies and productivity.
The Productivity Transformation Program (PTP), announced in
Third Quarter 2008 Results
For the 2008 third quarter, Schering-Plough reported net income available to common shareholders of
GAAP net sales for the 2008 third quarter totaled
Global cholesterol joint venture net sales, which include VYTORIN and ZETIA, totaled
Overall, Schering-Plough shares in approximately 50 percent of the profits of the joint venture with Merck, although there are different profit-sharing arrangements for the cholesterol products in countries around the world. Schering-Plough records its share of the income from operations in "Equity income," which totaled
Sales of Global Pharmaceuticals for the 2008 third quarter totaled
Sales of REMICADE increased 32 percent to
Sales of TEMODAR, a treatment for certain types of brain tumors, grew 27 percent to
Global sales of NASONEX, an inhaled nasal corticosteroid for allergies, rose 6 percent to
Sales of PEGINTRON for hepatitis C increased 6 percent to
In the women's health franchise, sales for FOLLISTIM/PUREGON, a fertility treatment, for the third quarter of 2008 were
Global sales of CLARINEX, a nonsedating antihistamine, in the third quarter of 2008 were
International sales of prescription CLARITIN were
Animal Health sales totaled
Consumer Health Care sales were
Schering-Plough does not record sales of its cholesterol joint venture and incurs substantial costs such as selling, general and administrative costs that are not reflected in "Equity income" and are borne by the overall cost structure of Schering-Plough. As a result, Schering-Plough's gross margin and ratios of selling, general and administrative (SG&A) expenses and R&D expenses as a percentage of sales do not reflect the benefit of the impact of the cholesterol joint venture's operating results.
Schering-Plough's gross margin on a GAAP basis was unfavorably affected by purchase accounting adjustments and as a result was 62.0 percent for the 2008 third quarter as compared to 67.1 percent in the 2007 period. The gross margin percentage excluding purchase accounting adjustments was 66.9 percent in the third quarter of 2008.
SG&A expenses were
Research and development spending for the 2008 third quarter increased to
Recent Developments
The company also offered the following summary of recent significant developments that have previously been announced, including:
-- Gained European Commission (EC) approval of BRIDION (sugammadex) injection, the first and only selective relaxant binding agent and the first major pharmaceutical advance in the field of anesthesia in two decades. (Announced July 29) -- Received a "not-approvable" letter from the U.S. Food and Drug Administration for sugammadex. (Announced August 1) -- Reported top-line results from a planned interim analysis of a Phase II study of boceprevir, an investigational oral hepatitis C protease inhibitor. (Announced August 4) -- Announced expansion of the company's presence in China and establishment of Shanghai Schering-Plough Pharmaceutical Co. Ltd., as a wholly owned operation based in Shanghai through the acquisition of shares of former joint venture partners. (Announced August 12) -- Began the European launch of BRIDION injection. (Announced September 10) -- Closed a transaction with Pfizer Animal Health to divest to Pfizer certain animal health products from selected franchises in the European Economic Area as requested by the EC as part of clearing Schering-Plough's acquisition of OBS. (Announced September 10) -- Ranked No. 5 in the Top 20 list of Science magazine's annual online Top Employer Survey. (Reported October 10) -- Announced the transition of leadership of its Animal Health unit from Ruurd Stolp, D.V.M., Ph.D., to Raul E. Kohan, who was previously Deputy Head of the Animal Health unit. (Announced October 17)
Third Quarter 2008 Conference Call and Webcast
Schering-Plough will conduct a conference call today at
DISCLOSURE NOTICE: The information in this press release, the comments of Schering-Plough officers during the earnings teleconference/webcast on
Schering-Plough is an innovation-driven, science-centered global health care company. Through its own biopharmaceutical research and collaborations with partners, Schering-Plough creates therapies that help save and improve lives around the world. The company applies its research-and-development platform to human prescription and consumer products as well as to animal health products. Schering-Plough's vision is to "Earn Trust, Every Day" with the doctors, patients, customers and other stakeholders served by its colleagues around the world. The company is based in
SCHERING-PLOUGH CORPORATION U.S. GAAP report for the Third quarter ended September 30 (unaudited): (Amounts in millions, except per share figures) Third Quarter Nine Months 2008 2007 2008 2007 ---- ---- ---- ---- Net sales 1/ $4,576 $2,812 $14,154 $8,965 Cost of sales 2/ 1,737 925 5,782 2,838 Selling, General and administrative 1,660 1,262 5,208 3,833 Research and development 3/ 893 669 2,679 2,071 Other expense/(income), net 4/ (39) (390) 189 (451) Special and acquisition- related charges 5/. 101 20 218 32 Equity income 6/ (434) (506) (1,444) (1,483) ----- ----- ------- ------- Income before income taxes 658 832 1,522 2,125 Income tax expense 69 82 207 272 -- -- --- --- Net Income $589 $750 $1,315 $1,853 ==== ==== ====== ====== Preferred stock dividends 38 37 113 80 -- -- --- -- Net income available to common shareholders $551 $713 $1,202 $1,773 ==== ==== ====== ====== Diluted Earnings per common share $0.34 $0.45 $0.74 $1.15 ===== ===== ===== ===== Average shares outstanding - diluted 1,636 1,622 1,635 1,596 The company incurs substantial costs related to the cholesterol joint venture, such as selling, general and administrative costs, that are not reflected in the "Equity income" and are borne by the overall cost structure of Schering-Plough. 1/ Net sales for the three and nine months ended September 30, 2008, include sales of $1.4 billion and $4.2 billion, respectively, from Organon BioSciences (OBS) which was acquired on November 19, 2007. 2/ Cost of sales for the three and nine months ended September 30, 2008 include purchase accounting adjustments of $221 million and $1.3 billion, respectively, related to the acquisition of OBS. 3/ Research and development for the three and nine months ended September 30, 2007 include $20 million and $176 million, respectively, related to upfront R&D payments. 4/ Included in other expense/(income), net for the three and nine months ended September 30, 2008 were $160 million related to the previously announced divestiture of certain animal health products. Included in other expense/(income), net for the three and nine months ended September 30, 2007 were mark-to-market gains of $314 million and $282 million, respectively, related to Euro-denominated currency options related to the acquisition of OBS. 5/ Special and acquisition-related charges relate to the Productivity Transformation Program (PTP) which also incorporates the ongoing integration of OBS. For the three and nine months ended September 30, 2008 these charges were $101 million ($93 million for severance costs and $8 million for integration-related costs) and $218 million, respectively. Special and acquisition-related charges for the three and nine months ended September 30, 2007 were $20 million and $32 million, respectively. 6/ Equity income for the three and nine months ended September 30, 2008 include $19 million and $83 million, respectively, of income related to the termination of a respiratory joint venture with Merck.
SCHERING-PLOUGH CORPORATION
Reconciliation from Reported Net Income Available to Common Shareholders and Reported Diluted Earnings Per Common Share to As Reconciled Amounts for Net Income
Available to Common Shareholders and Diluted Earnings per Common Share
(Amounts in Millions, except per share figures)
To supplement its consolidated financial statements presented in accordance with accounting principles generally accepted in
"As Reconciled" amounts related to Net income available to common shareholders and Diluted earnings per common share are non-U.S. GAAP measures used by management in evaluating the performance of Schering-Plough's overall business. The effects of purchase accounting adjustments, special and acquisition-related items and other specified items have been excluded from Net income available to common shareholders and Diluted earnings per common share as management of Schering-Plough does not consider these items to be indicative of continuing operating results. Schering-Plough believes that these "As Reconciled" performance measures contribute to a more complete understanding by investors of the overall results of the company and enhances investor understanding of items that impact the comparability of results between fiscal periods. Net income available to common shareholders and Diluted earnings per common share, as reported, are required to be presented under U.S. GAAP.
Three months ended September 30, 2008 (unaudited) ------------------------------------------------------- Special and Purchase Acquisition- Other As As Accounting Related Specified Reconciled Reported Adjustments Items Items (1) ------------------------------------------------------- Net sales $4,576 $- $- $- $4,576 Cost of sales 1,737 (221) - - 1,516 Selling, general and administrative 1,660 (1) - - 1,659 Research and development 893 (3) - - 890 Other expense/ (income), net (39) - - 160 121 Special and acquisition-related charges 101 - (101) - - Equity income (434) - - 19 (415) ----- ---- ---- ---- ----- Income before income taxes 658 225 101 (179) 805 Income tax expense/(benefit) 69 (54) (16) 11 128 -- ---- ---- -- --- Net income $589 $171 $85 $(168) $677 ---- ---- --- ------ ---- Preferred stock dividends 38 - - - 38 -- --- --- --- -- Net income available to common shareholders $551 $171 $85 $(168) $639 ==== ==== === ====== ==== Diluted earnings per common share $0.34 $0.39 ===== ===== Average shares outstanding- diluted 1,636 1,636 (1) "As Reconciled" to exclude purchase accounting adjustments, special and acquisition-related items and other specified items.
SCHERING-PLOUGH CORPORATION
Reconciliation from Reported Net Income Available to Common Shareholders
and Reported Diluted Earnings Per Common Share to As Reconciled Amounts for Net Income
Available to Common Shareholders and Diluted Earnings per Common Share
(Amounts in Millions, except per share figures)
Three months ended September 30, 2007 (unaudited) ------------------------------------------------------- Special and Purchase Acquisition- Other As As Accounting Related Specified Reconciled Reported Adjustments Items Items (1) ------------------------------------------------------- Net sales $2,812 $- $- $- $2,812 Cost of sales 925 - - - 925 Selling, general and administrative 1,262 - - - 1,262 Research and development 669 - - (20) 649 Other expense/ (income), net (390) - 314 - (76) Special and acquisition-related charges 20 - (20) - - Equity income (506) - - - (506) ----- ---- ---- ---- ----- Income before Income taxes 832 - (294) 20 558 Income tax expense 82 - - - 82 -- ---- ---- ---- -- Net income $750 $- $(294) $20 $476 ---- ---- ------ --- ---- Preferred stock dividends 37 - - - 37 -- ---- ---- ---- -- Net income available to common shareholders $713 $- $(294) $20 $439 ==== ==== ====== === ==== Diluted earnings per common share $0.45 $0.28 ===== ===== Average shares outstanding- diluted 1,622 1,622 (1) "As Reconciled" to exclude purchase accounting adjustments, special and acquisition-related items and other specified items. (2) Diluted earnings per common share for the three month period ended September 30, 2007 is calculated using a numerator of $731 million, which is the arithmetic sum of net income available to common shareholders of $713 million plus dividends of $18 million related to the 2004 preferred stock which are dilutive, and a denominator of 1,622 which represents the average diluted shares outstanding for the third quarter of 2007. The 2004 preferred stock was dilutive under accounting rules. The 2007 preferred stock was not dilutive for the three months ended September 30, 2007.
SCHERING-PLOUGH CORPORATION
Reconciliation from Reported Net Income Available to Common Shareholders
and Reported Diluted Earnings Per Common Share to As Reconciled Amounts for Net Income
Available to Common Shareholders and Diluted Earnings per Common Share
(Amounts in Millions, except per share figures)
Nine months ended September 30, 2008 (unaudited) ------------------------------------------------------- Special and Purchase Acquisition- Other As As Accounting Related Specified Reconciled Reported Adjustments Items Items (1) ------------------------------------------------------- Net sales $14,154 $- $- $- $14,154 Cost of sales 5,782 (1,264) - - 4,518 Selling, general and administrative 5,208 (3) - - 5,205 Research and development 2,679 (7) - - 2,672 Other expense/ (income), net 189 - - 177 366 Special and acquisition-related charges 218 - (218) - - Equity income (1,444) - - 83 (1,361) ------- ---- ---- -- ------- Income before income taxes 1,522 1,274 218 (260) 2,754 Income tax expense/(benefit) 207 (192) (25) 16 408 --- ----- ---- -- --- Net income $1,315 $1,082 $193 $(244) $2,346 ------ ------ ---- ------ ------ Preferred stock dividends 113 - - - 113 --- ---- ---- ---- --- Net income available to common shareholders $1,202 $1,082 $193 $(244) $2,233 ====== ====== ==== ====== ====== Diluted earnings per common share $0.74 $1.37 ===== ===== Average shares outstanding- diluted 1,635 1,635 (1) "As Reconciled" to exclude purchase accounting adjustments, special and acquisition-related items and other specified items.
SCHERING-PLOUGH CORPORATION
Reconciliation from Reported Net Income Available to Common Shareholders
and Reported Diluted Earnings Per Common Share to As Reconciled Amounts for Net Income
Available to Common Shareholders and Diluted Earnings per Common Share
(Amounts in Millions, except per share figures)
Nine months ended September 30, 2007 (unaudited) ------------------------------------------------------- Special and Purchase Acquisition- Other As As Accounting Related Specified Reconciled Reported Adjustments Items Items (1) -------------------------------------------------------Net sales $8,965 $- $- $- $8,965 Cost of sales 2,838 - - - 2,838 Selling, general and administrative 3,833 - - - 3,833 Research and development 2,071 - - (176) 1,895 Other expense/ (income), net (451) - 282 - (169) Special and acquisition-related charges 32 - (32) - - Equity income (1,483) - - - (1,483) ------- ---- ---- ---- ------- Income before income taxes 2,125 - 250 176 2,051 Income tax expense/(benefit) 272 - - - 272 --- ---- ---- ---- --- Net income $1,853 $- $(250) $176 $1,779 ------ ---- ------ ---- ------ Preferred stock dividends 80 - - - 80 -- ---- ---- ---- -- Net income available To common shareholders $1,773 $- $(250) $176 $1,699 ====== ===== ====== ==== ====== Diluted earnings per common share $1.15 $1.10 ===== ===== Average shares outstanding- diluted 1,596 1,596 (1) "As Reconciled" to exclude purchase accounting adjustments, special and acquisition-related items and other specified items. (2) Diluted earnings per common share for the nine month period ended September 30, 2007 is calculated using a numerator of $1.834 billion, which is the arithmetic sum of net income available to common shareholders of $1.773 billion plus dividends of $61 million related to the 2004 preferred stock, and a denominator of 1,596 which represents the average diluted shares outstanding for the nine months ended September 30, 2007. The 2004 preferred stock was dilutive under accounting rules. The 2007 preferred stock was not dilutive for the nine months ended September 30, 2007.
SCHERING-PLOUGH CORPORATION
Reconciliation from Reported Net Income Available to Common Shareholders
and Reported Diluted Earnings Per Common Share to As Reconciled Amounts for Net Income
Available to Common Shareholders and Diluted Earnings per Common Share
(Amounts in Millions)
"As Reconciled" amounts related to Net income available to common shareholders and Diluted earnings per common share reflect the following adjustments:
Third Quarter Nine Months (unaudited) (unaudited) ---------------- -------------- 2008 2007 2008 2007 ---- ---- ---- ---- Purchase accounting adjustments: ------------------- Amortization of intangibles in connection with the acquisition of Organon BioSciences (a) $136 $- $407 $- Depreciation related to the fair value adjustment of fixed assets related to the acquisition of Organon BioSciences (b) 11 - 27 - Charge related to the fair value adjustment to inventory related to the acquisition of Organon BioSciences (a) 78 - 840 - -- ---- --- ---- Total Purchase accounting adjustments, pre-tax 225 - 1,274 - Income tax benefit 54 - 192 - -- ---- --- ---- Total purchase accounting adjustments $171 $- $1,082 $- ---- ---- ------ ---- Special And acquisition- related items: ------------------------ Special and integration-related activities (e) $101 $20 $218 $32 Acquisition-related gains on currency-related and interest-related items (d) - (314) - (282) ---- ----- ---- ----- Total special and acquisition-related items, pre-tax 101 (294) 218 (250) Income tax benefit 16 - 25 - -- ---- -- ---- Total Special and acquisition-related items $85 $(294) $193 $(250) --- ------ ---- ------ Other specified items: ---------------------- Gain on sale of previously announced divestiture of certain Animal Health products (d) $(160) $- $(160) $- Income from respiratory JV termination (f) (19) - (83) - Gain on sale of manufacturing plant (d) - - (17) - Upfront R&D payments (c) - 20 - 176 ---- -- ---- --- Total other specified items, pre-tax (179) 20 (260) 176 Income tax expense 11 - 16 - -- ---- -- ---- Total other specified items $(168) $20 $(244) $176 ------ --- ------ ---- Total purchase accounting adjustments, special and acquisition-related items and other specified items $88 $(274) $1,031 $(74) === ====== ====== ===== (a) Included in Cost of sales (b) Included in Cost of sales, Selling, general and administrative and Research and development (c) Included in Research and development (d) Included in Other expense/(income), net (e) Included in Special and acquisition-related charges (f) Included in Equity income
SCHERING-PLOUGH CORPORATION
Report for the period ended
GAAP Net Sales by Key Product
(Dollars in millions) Third Quarter Nine Months
--------------------- -------------------
2008 2007 % 2008 2007 %
---- ---- - ---- ---- -
HUMAN PRESCRIPTION
PHARMACEUTICALS a/ $3,539 $2,291 54% $10,798 $7,209 50%
REMICADE 564 426 32% 1,627 1,193 36%
TEMODAR 273 215 27% 760 627 21%
NASONEX 258 242 6% 876 821 7%
PEGINTRON 235 221 6% 689 672 3%
CLARINEX / AERIUS 176 171 3% 630 625 1%
FOLLISTIM/PUREGON c/ 142 - - 450 - -
NUVARING c/ 118 - - 330 - -
CLARITIN RX 87 83 5% 326 297 10%
INTEGRILIN 84 78 7% 236 241 (2%)
CAELYX 80 64 24% 232 191 22%
ZEMURON c/ 72 - - 202 - -
AVELOX 65 78 (17%) 274 269 2%
REBETOL 63 60 5% 193 206 (6%)
SUBUTEX / SUBOXONE 63 55 15% 178 163 10%
REMERON c/ 61 - - 190 - -
INTRON A 61 61 - 177 176 1%
CERAZETTE c/ 49 - - 142 - -
LIVIAL c/ 48 - - 143 - -
ELOCON 45 40 12% 137 119 15%
ASMANEX 40 36 12% 131 121 9%
NOXAFIL 40 24 62% 111 60 85%
PROVENTIL / ALBUTEROL
CFC 38 52 (26%) 127 166 (23%)
MERCILON c/ 38 - - 128 - -
IMPLANON c/ 37 - - 119 - -
MARVELON c/ 37 - - 114 - -
FORADIL 25 25 - 76 77 (2%)
Other Pharmaceuticals 740 360 106% 2,200 1,185 86%
ANIMAL HEALTH b/ 759 248 206% 2,299 744 209%
CONSUMER HEALTH CARE 278 273 2% 1,057 1,012 4%
OTC 160 162 (1%) 550 521 6%
OTC CLARITIN 92 104 (11%) 350 368 (5%)
MiraLAX 31 16 90% 85 30 N/M
Other OTC 37 42 (11%) 115 123 (7%)
Foot Care 96 92 5% 286 272 5%
Sun Care 22 19 11% 221 219 1%
-- -- --- ---
CONSOLIDATED GAAP NET
SALES $4,576 $2,812 63% $14,154 $8,965 58%
====== ====== ======= ======
a/ Human Prescription Pharmaceuticals Net sales for the three and nine
months ended September 30, 2008 include net sales of $896 million and $2.7
billion, respectively, from the human health segment of Organon
BioSciences (OBS), which was acquired on November 19, 2007.
b/ Animal Health Net sales for the three and nine months ended September
30, 2008 include net sales of $503 million and $1.5 billion, respectively,
from the animal health segment of OBS, which was acquired on November 19,
2007.
c/ Products acquired in OBS acquisition on November 19, 2007.
NOTE: Additional information about U.S. and international sales for
specific products is available by calling the company or visiting the
Investor Relations Web site at http://ir.schering-plough.com.
SCHERING-PLOUGH CORPORATION
Reconciliation of Non-U.S. GAAP Financial Measures
Adjusted net sales, defined as Net sales plus an assumed 50 percent of global cholesterol joint venture net sales.
(Dollars in millions) Three months ended September 30, (unaudited) -------------------------------- 2008 2007 % -------------------------------- Net sales, as reported a/ $4,576 $2,812 63% 50 percent of cholesterol joint venture net sales b/ 545 639 (15%) Adjusted net sales b/ $5,121 $3,451 48%
(Dollars in millions) Nine months ended September 30, (unaudited) -------------------------------- 2008 2007 % -------------------------------- Net sales, as reported a/ $14,154 $8,965 58% 50 percent of cholesterol joint venture net sales b/ 1,719 1,838 (6%) Adjusted net sales b/ $15,873 $10,803 47% a/ Net sales for the three and nine months ended September 30, 2008 include sales from Organon BioSciences (OBS) which was acquired on November 19, 2007. b/ Total Net sales of the cholesterol joint venture for the three months ended September 30, 2008 and 2007 were $1.1 billion and $1.3 billion, respectively. Total Net sales of the cholesterol joint venture for the nine months ended September 30, 2008 and 2007 were $3.4 billion and $3.7 billion, respectively. NOTE: Adjusted net sales, defined as net sales plus an assumed 50 percent of global cholesterol joint venture net sales, is a non-U.S. GAAP measure used by management in evaluating the performance of the Schering-Plough's overall business. Schering-Plough believes that this performance measure contributes to a more complete understanding by investors of the overall results of the company. Schering-Plough provides this information to supplement the reader's understanding of the importance to the company of its share of results from the operations of the cholesterol joint venture. Net sales (excluding the cholesterol joint venture net sales) is required to be presented under U.S. GAAP. The cholesterol joint venture's net sales are included as a component of income from operations in the calculation of Schering-Plough's "Equity income." Net sales of the cholesterol joint venture do not include net sales of cholesterol products in non-joint venture territories.
SOURCE Schering-Plough Corporation