Schering Results Miss Targets; Shares Plunge
Schering-Plough on Monday reported third-quarter profit and sales that fell short of Wall Street's target, sending shares down more than 13 percent amid concerns about its flagship cholesterol drugs.
The disappointing results halted momentum for Schering-Plough , which has been one of the best-performing healthcare stocks in 2007 behind enthusiasm for its experimental medicines and sales of its cholesterol drugs.
"We expect the stock to be under pressure, as its valuation was expecting outperformance relative to consensus," Bear Stearns analyst John Boris said in a research note.
Boris said Schering-Plough traded at a 27 percent premium to peers, before Monday's trading, based on 2008 earnings estimates. He said that gross profit margins were weaker than expected and he was concerned about the sales performance for the quarter.
The company earned $713 million or 45 cents per share, compared with $287 million, or 19 cents per share, a year earlier.
However, earnings were 28 cents per share, excluding a net benefit for acquisition-related items and a charge for an upfront licensing payment. Analysts on average expected 30 cents per share, according to Reuters Estimate.
Global sales rose 9 percent to $2.81 billion, shy of Wall Street's target of $2.88 billion.
Morgan Stanley analyst Jami Rubin said sales of the cholesterol drugs and allergy drug Nasonex came in slightly short of her estimates.
Sales of cholesterol drugs Vytorin and Zetia, which the company sells through a joint venture with Merck , rose 26 percent to $1.3 billion.
Schering-Plough does not record sales of its cholesterol joint venture with Merck. Including an adjustment of an assumed 50 percent of the global cholesterol joint venture net sales, Schering-Plough said its adjusted sales would have risen 12 percent to $3.5 billion.
Even so, Deutsche Bank analyst Barbara Ryan cautioned that Vytorin prescription growth are "moderating," and were flat from the second quarter. "Base business revenues were generally below our expectations," Ryan said, referring to products other than its its cholesterol medicines.
Sales of Remicade, which treats various inflammatory diseases, rose 34 percent to $426 million.
Also on Monday, Schering-Plough said its experimental anti-clotting drug, as in an earlier trial, met its main goal in two additional mid-stage trials of not increasing bleeding risk when given in combination with standard anti clotting drugs.
The company's shares have soared 38 percent for the year to date, helped by growing optimism about its experimental drugs -- including the thrombin receptor antagonist anti-clotting drug and a new type of treatment for hepatitis C.