Schering stock jumps on earnings win

Vytorin sales down on failed study, but the drop does not affect 2007 results that beat the street.

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By Aaron Smith, staff writer

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NEW YORK ( -- Schering-Plough may have lost billions of dollars in the fourth quarter from an acquisition, but its stock jumped Tuesday as the drugmaker's earnings without charges beat expectations.

Including charges related to its purchase of Organon BioSciences, Schering (SGP, Fortune 500) said it lost $3.4 billion, or $2.08 per share, in the quarter, compared with $182 million, or 12 cents per share, a year ago.

But without those charges, Schering's profit was 27 cents per share, beating the 24-cent forecast from analyst's polled by Thomson Financial.

Schering's stock rose 6% on the news.

The drugmaker also reported a quarterly sales surge of 40% to $3.7 billion from $2.7 billion during the same period the prior year. Revenue was driven by the fast-growing blockbuster drug Remicade, whose sales jumped by more than one-third in the fourth quarter to $455 million. Remicade is a treatment for inflammatory diseases including rheumatoid arthritis, Crohn's disease and various types of psoriasis.

For the full-year 2007, Schering announced a net loss of $1.6 billion, or $1.04 per share. Sales surged 20% for the year to $12.7 billion.

Schering's fourth-quarter sales report did not include revenue from its embattled cholesterol blockbuster Vytorin, a combination of its Zetia and Merck & Co.'s (MRK, Fortune 500) Zocor. Because of the partnership, these sales are listed separately and Schering and Merck equally split the $1.4 billion total.

Including its share of Vytorin sales, Schering-Plough's adjusted revenue for the 2007 fourth quarter would have been $4.4 billion.

Schering's 2007 earnings were unaffected by its ongoing Vytorin scandal, which has driven the stock down 26% since Jan. 14, 2008 - the day that Schering and Merck announced the results of a study that failed to prove Vytorin reduced plaque in neck arteries, compared to Zocor on its own.

Schering chief financial officer Robert Bertolini said in a conference call with investors that U.S. sales have declined since the study results were released. But chief executive Fred Hassan would not speculate on how it might affect future business.

"Regarding the business impact going forward, basically it's too early to tell," Hassan said on the same call.

Hassan reiterated his assertion that Vytorin is safe. "We stand behind our products, and we stand behind our science," he said. "Over time, common sense and good science will prevail."

As for its pipeline, Schering said two experimental drugs advanced to the final phase of testing in 2007. They include a potential treatment for disease of the blood vessels, as well as vicriviroc an experimental HIV treatment.

James McKean, an analyst for Atlantic Equities, said that Schering could launch vicriviroc as early as 2009, but annual sales would peak at $300 million by 2012, falling short of the billion-dollar milestone that generally marks a blockbuster.

McKean said that the blood vessel treatment wouldn't be launched until 2011. While some analysts see is as a potential blockbuster, McKean said the market is too competitive. He said that drug faces potential competition from experimental rivals from Johnson & Johnson (JNJ, Fortune 500) and Bayer, and Pfizer (PFE, Fortune 500) and Bristol-Myers Squibb (BMY, Fortune 500). To top of page

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