Schering-Plough has posted a strong rise in profits for the third quarter but it was not enough to prevent a hefty share price collapse as sales came in lower than expected.
Net income soared to $750 million – up from $309 million a year ago – helped by an acquisition-related gain of $294 million, while sales were up 9% to $2.81 billion, but this latter figure disappointed analysts and the stock slumped 13.4% to close at $28.34.
The share price decline looks somewhat excessive but seems to come from a general disappointment about the performance of the cholesterol drugs Vytorin (ezetimibe and simvastatin) and Zetia (ezetimibe), sold through a joint venture with Merck. Combined sales of the drugs jumped 26% to $1.3 billion but analysts say that Vytorin sales have levelled off since the second quarter and the drug is losing market share of generic versions of simvastatin on its own, which Merck sells under the brand name Zocor.
Of its other drugs, the anti-inflammatory Remicade (infliximab), the Johnson & Johnson drug which S-P sells outside the USA, rose 34% to $426 million, while the anti-allergy medication Nasonex jumped 10% to $242 million. Sales of the brain cancer drug Temodar (temozolomide) increased 20% to $215 million and the hepatitis C drug PegIntron (pegylated interferon) rose 7% to $221 million, although revenues were flat for the non-sedating antihistamine Clarinex (desloratadine) at $171 million.
S-P chief executive Fred Hassan put the share price decline down to the fact that the company does not as a rule offer financial guidance so this can lead to “undershooting and overshooting" by analysts. In fact he seemed pretty pleased with the fact that S-P had recorded its 12th consecutive quarter of “double-digit adjusted sales growth", adding that “our strategy to grow the top line, exercise financial discipline and expand our R&D pipeline again delivered strong results".
The company gave an update on its $14.65 billion purchase of Netherlands-based Organan BioSciences from Akzo Nobel, noting that it has won clearance from the European Commission (subject to the divestiture of certain animal healthcare products) and has secured $9 billion to pay for the purchase in financing through a mix of equity and debt. S-P said that it still needs US regulatory approval, including clearance from the Federal Trade Commission, but the deal should close by the end of the year.
Mr Hassan added that with the Organon acquisition, “we will have a total of 12 significant projects in Phase III – we will have a pipeline with a Phase III bulge.” He noted that this, combined with “relatively long exclusivity of our marketed product portfolio” puts S-P in “a substantially stronger position in terms of its late-stage pipeline and portfolio than only four years ago".