Schering-Plough has posted a 48.5% decline in earnings for the first quarter but the results are nowhere near as bad as some analysts had been predicting.

Net income came in at $291 million, or $0.15 per share, and the firm said that the decline was a result of acquisition-related charges from S-P’s acquisition of Organon Biosciences last year. However that purchase is now making a healthy contribution to sales which rose 56.5% to $4.66 billion and pharmaceutical turnover of $3.56 billion, up 48.3%.

The controversial cholesterol drugs Vytorin (ezetimibe and simvastatin) and Zetia (ezetimibe), sold through a joint venture with Merck & Co, and combined sales of the drugs were up 6% to $1.2 billion. S-P does not record sales from the JV but said that assuming it gets half of the revenues from the Merck link-up, adjusted sales for the quarter would have risen to $5.3 billion. However US sales from the JV were down 5% in the USA.

Controversy has surrounded Vytorin since the results of the ENHANCE trial were finally released, which showed that the coimbination was no more effective at slowing the progression of atherosclerosis than simvastatin (the now genericised Zocor) alone. The next few quarters are likely to result in a dramatic decline as doctors have been advised to think twice before prescribing Vytorin.

On the bright side, the anti-inflammatory Remicade (infliximab), the Johnson & Johnson drug which S-P sells outside the USA, rose 36% to $507 million, while the anti-allergy medication Nasonex jumped 8% to $307 million. Sales of the brain cancer drug Temodar (temozolomide) increased 20% to $236 million and the hepatitis C drug PegIntron (pegylated interferon) rose 4% to $225 million. Revenues for the non-sedating antihistamine Clarinex (desloratadine) edged up 4% to $213 million.

As for Organon products, Follistim/Puregon (follitropin beta), a fertility treatment, had sales of $145 million, while the contraceptive Nuvaring contributed $96 million.

Chief executive Fred Hassan said he was confident about S-P’s future because “we have a strong line of products protected by long periods of market exclusivity” and “geographic and business diversity”, with nearly 70% of sales coming from outside the USA. No doubt referring to the Vytorin and Zetia problem, Mr Hassan said "our team overcame enormous challenges in 2003 and 2004. Those challenges were much bigger than the ones we face today. We are determined to power through."

Analysts were impressed with the performance and Leerink Swann analyst Seamus Fernandez said that "sales, general and administrative expenses and R&D costs together were $190 million below our forecasts". Barbara Ryan at Deutsche Bank issued a note saying that the Organon acquisition dilutes S-P's dependence on the Merckl joint-venture “and allows it to leverage its cost structure''.