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Wall St. shuns Schering
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February 16, 2001: 2:02 p.m. ET
Drugmaker's stock drops after warning that first-quarter results will fall short
By Staff Writer Martha Slud
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NEW YORK (CNNfn) - Shares of Schering-Plough Corp. plunged about 15 percent Friday after the drugmaker warned that its first-quarter and full-year earnings will be damaged by manufacturing delays following plant inspections by federal regulators.
Earnings warnings are rare from large-cap pharmaceutical companies, which Wall Street typically counts on to post solid growth in operating profit year-over-year. In response to the late-Thursday announcement, the Kenilworth, N.J.-based company's stock dropped $7.22 to $41.10 in afternoon trading Friday.
The stock still trades about 33 percent above its 52-week low of $30.50. Drug companies have posted healthy gains in recent months amid the turmoil in technology and other sectors of the market.
 The company disclosed Thursday that the U.S. Food and Drug Administration uncovered manufacturing deficiencies at the company's plants in New Jersey and Puerto Rico. The company said it is working with the FDA to resolve the situation.
The news comes at a bad time for Schering-Plough (SGP: Research, Estimates), which is hoping to launch a new version of blockbuster antihistamine drug Claritin in the United States in time for the spring allergy season. Claritin, a cash cow with sales of $3 billion last year, could lose its patent exclusivity as early as 2002, opening the door to cheaper, generic versions of the drug.
Schering-Plough said the FDA has told the company it must improve its manufacturing procedures before it approves the new allergy treatment, known as Clarinex. European regulators last month approved the drug for use throughout the European Union.
Schering-Plough developed Clarinex with biotechnology firm Sepracor Inc. (SEPR: Research, Estimates) of Marlborough, Mass. Shares of Sepracor, which stands to receive royalty payments from the new drug's sales, slid $5.63, or 9 percent, to $59.25 in afternoon trading.
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Meanwhile, Schering-Plough's woes in launching its new allergy drug could be good news for its rivals. American depositary receipts of Franco-German drugmaker Aventis SA (AVE: Research, Estimates), maker of Claritin competitor Allegra, rose $2.25 to $81.24 Friday afternoon, while shares of No. 1 drugmaker Pfizer Inc. (PFE: Research, Estimates), which markets allergy drug Zyrtec, added $1.11 to $45.36.
Schering-Plough also makes antiviral/anti-cancer therapy Intron A and the hepatitis combination therapy Rebetron.
Earnings estimates revised
Schering-Plough said it expects to post earnings of as little as 36 cents per share for the first three months of the year, saying it anticipates as much as a 15 percent drop compared with profit of 42 cents per share in the first quarter of 2000. Analysts polled by earnings tracker First Call Corp. had expected the firm to earn 48 cents per share in the first quarter and $1.90 a share for full year 2001.
The company did not release earnings projections for the full year, but said the manufacturing woes are likely to cut into profit in subsequent quarters.
In response to the reduced forecasts, several Wall Street brokerages slashed their ratings on the drugmaker. Wasserstein Perella cut is rating to "hold" from strong buy, while Credit Suisse First Boston lowered the stock to "hold" from "buy."
Merrill Lynch pharmaceutical analyst Steven Tighe said it is difficult to assess the revenue impact on the company from the manufacturing delays.
"The timing on resolving this issue is unknown, as the company is in the process of rectifying this situation," Tighe wrote in a research report. "Quick resolution is of paramount importance in order to guarantee adequate time to switch the Claritin franchise to Clarinex." 
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