Schering-Plough CEO Tells CNBC That Restructuring Is Working
The chief executive of Schering-Plough told CNBC that the drug company's latest earnings are a further sign that a three-year-old restructuring is having a positive impact.
"We are going into this year with momentum, we are growing very nicely on the top line, we're exerting financial discipline, and our bottom line is growing faster than our top line," CEO Fred Hassan said in an appearance on "Power Lunch" on Monday. "That's a great strategy to have."
The company announced fourth-quarter earnings Monday morning in-line with Wall Street expectations.
"What's very, very good is to see that this company--that was in dire straits three-and-a half years ago--has had its first three years of a strategic plan come through beautifully," Hassan added. "We're a much stronger company than we were three-and-a half years ago."
The company, based in Kenilworth, N.J., reported an adjusted profit of 17 cents per share on sales of $2.7 billion, compared with the Thomson Financial consensus forecasts of 17 cents and $2.53 billion, respectively.
Schering-Plough, which co-markets cholesterol drug Vytorin with Merck , logged $1.1 billion in sales of cholesterol drugs in the quarter. Sales of arthritis drug Remicade rose 34% from the year-ago period to $337 million.
James Kelly of Goldman Sachs raised the price target on the stock to $28 from $25 but said the company will need to find new areas of growth as sales of cholesterol drugs Vytorin and Zetia cool off.
"Schering-Plough’s key strategic challenge is diversification of the revenue base, away from the cholesterol franchise," Kelly wrote in a research report sent to clients on Monday.
"The growth of Nasonex and Remicade are important avenues of diversification, and we will watch the impact of new competition on these franchises."
Merrill Lynch's David Risinger expressed a similar sentiment, saying investor attention will be closely focused on the slowdown in the cholesterol drug market.
"Cholesterol market new prescription growth has been cut in half recently, to approximately 6% to 7% year-over-year growth in the last three weeks versus 13% growth in full-year 2006," Risinger said.