SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K Annual Report
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1999 Commission file
Number 1-6571
SCHERING-PLOUGH CORPORATION
Incorporated in New Jersey 22-1918501
One Giralda Farms (I.R.S.Employer
Madison, New Jersey 07940-1000 Identification No.)
(973) 822-7000 (telephone number)
Securities registered pursuant to section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Shares, $.50 par value New York Stock Exchange
Preferred Share Purchase Rights* New York Stock Exchange
*At the time of filing, the Rights were not traded
separately from the Common Shares.
Indicate by check mark whether the registrant has filed
all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the
preceding 12 months and has been subject to such filing
requirements for the past 90 days. YES X NO
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this
Form 10-K.
Common shares outstanding as of January 31, 2000: 1,470,789,125
Aggregate market value of common shares at January 31,
2000 held by non-affiliates based on closing price: $64 billion.
Part of Form 10-K
Documents incorporated by reference incorporated into
Schering-Plough Corporation 1999 Parts I, II and IV
Annual Report to Shareholders
Schering-Plough Corporation Proxy Part III
Statement for the annual meeting of
shareholders on April 25, 2000
Part I
Item 1. Business
The terms "Schering-Plough" and the "Company," as used
herein, refer to Schering-Plough Corporation and its
subsidiaries, except as otherwise indicated by the
context. Schering-Plough Corporation is a holding
company which was incorporated in 1970.
Subsidiaries of Schering-Plough Corporation are engaged
in the discovery, development, manufacturing and
marketing of pharmaceutical products worldwide.
Discovery and development efforts target the field of
human health. However, application in the field of
animal health can result from these efforts. The
Company views animal health applications as a means to
maximize the return on investments in discovery and
development. The Company operates primarily in the
prescription pharmaceutical marketplace. However, the
Company historically has sought regulatory approval to
switch prescription products to over-the-counter (OTC)
status as a means of extending a product's life cycle.
In this way the OTC marketplace is yet another means of
maximizing the return on investments in discovery and
development. Effective January 1, 1999, the Company
changed the structure of its internal organization to
reflect this focus on pharmaceutical research and
development. As a result, the Company reports as one
segment. Previously, the Company was organized into two
business units: pharmaceuticals and health care.
Prescription products include: CLARITIN, CLARITIN-D,
NASONEX, PROVENTIL, VANCENASE and VANCERIL,
allergy/respiratory; CEDAX, EULEXIN, GARAMYCIN, INTRON
A, REBETRON Combination Therapy containing REBETOL
capsules and INTRON A injection, REMICADE and TEMODAR,
anti-infective and anticancer; DIPROLENE, DIPROSONE,
ELOCON, and LOTRISONE, dermatologicals; IMDUR,
INTEGRILIN, K-DUR and NITRO-DUR, cardiovasculars;
CELESTONE, and SUBUTEX, other pharmaceuticals.
Animal health products include: NUFLOR, TRIBRISSEN and
CEPRAVIN, antimicrobials; SPOT-ON, PULVEX, AUTOWORM and
TRIATOX, parasiticides; BANAMINE and ELTANAC, non-
steroidal anti-inflammatories; RALGRO, a growth
promotant implant; OTOMAX, OPTIMMUNE, and GENTOCIN
TOPICAL SPRAY, otic, ophthalmic and topical products;
a broad range of vaccines for many species; sutures,
bandages and nutritional products. In June 1997, the
Company purchased the worldwide animal health
operations of Mallinckrodt Inc. The acquisition was
recorded under the purchase method of accounting at a
cost of approximately $490 million, which includes the
assumption of debt and direct costs of the acquisition.
Foot care, OTC and sun care products include: CLEAR
AWAY wart remover; DR. SCHOLL'S foot care products;
LOTRIMIN AF and TINACTIN antifungals; A & D ointment;
AFRIN nasal decongestant; CHLOR-TRIMETON antihistamine;
CORICIDIN and DRIXORAL cold and decongestant products;
CORRECTOL laxative; GYNE-LOTRIMIN for vaginal yeast
infections; COPPERTONE, BAIN DE SOLEIL and SOLARCAINE
sun care products.
Net sales by major therapeutic category for each of the
three years in the period ended December 31, 1999 were
as follows (dollars in millions):
1999 1998 1997
Allergy & Respiratory $3,850 $3,375 $2,708
Anti-infective and Anticancer 1,738 1,263 1,156
Dermatologicals 682 619 571
Cardiovasculars 673 750 637
Other Pharmaceuticals 792 688 649
Animal Health 678 647 389
Foot Care 348 336 300
OTC 221 218 220
Sun Care 194 181 148
Consolidated net sales $9,176 $8,077 $6,778
The "Segment Information" as set forth in the Notes to
Consolidated Financial Statements in the Company's 1999
Annual Report to Shareholders is incorporated herein by
reference.
Prescription drugs are introduced and made known to
physicians, pharmacists, hospitals and managed care
organizations by trained professional service
representatives, and are sold to hospitals, managed
care organizations, wholesale distributors and retail
druggists. Prescription products are also promoted
through journal advertising, direct mail advertising,
consumer advertising and by distributing samples to
physicians.
Animal health products are promoted to veterinarians,
distributors and animal producers.
Foot care, OTC and Sun care products are sold through
wholesale and retail drug, food chain and mass
merchandiser outlets, and are promoted directly to the
consumer through television, radio, internet, print
and other advertising media.
The Company's subsidiaries own (or have licensed rights
under) a number of patents and patent applications,
both in the United States and abroad. Patents and
patent applications relating to the Company's
significant products, including without limitation the
CLARITIN family of products, INTRON A and REBETRON
Combination Therapy, containing REBETOL (ribavirin)
capsules and INTRON A (interferon alfa-2b) Injection
are of material importance to the Company. Certain
CLARITIN (loratadine) related patents expire in the
next several years. Specifically, the loratadine
compound patent for CLARITIN in the United States
expires in 2002 and the compound patent for
desloratadine, an active metabolite of loratadine,
expires in 2004. These patents are subject to
litigation as described in Item 3, Legal Proceedings,
of this Form 10-K.
Worldwide, the Company's products are sold under
trademarks. Trademarks are considered in the aggregate
to be of material importance to the business and are
protected by registration or common law in the United
States and most other markets where the products are
sold.
Raw materials essential to the Company are available in
adequate quantities from a number of potential
suppliers. Energy is expected to be available to the
Company in sufficient quantities to meet operating
requirements. There was no disruption experienced as a
result of the Year 2000 computer issue.
Seasonal patterns do not have a pronounced effect on
the combined operations of the Company.
There is generally no significant backlog of orders
since the Company's business is normally conducted on
an immediate shipment basis.
The pharmaceutical industry is highly competitive and
includes other large companies with substantial
resources for research, product development, promotion
and field selling support. There are numerous domestic
and international competitors in this industry. Some
of the principal competitive techniques used by the
Company for its products include research and
development of new and improved products, high product
quality, varied dosage forms and strengths, and
switching prescription products to non-prescription
status. In the United States, many of the Company's
products are subject to increasingly competitive
pricing as managed care groups, institutions,
government agencies and other buying groups seek price
discounts and rebates. Governmental and other
pressures toward the dispensing of generic products may
significantly reduce the sales of certain products when
they become no longer protected by patents.
During 1999 and 1998, 12 percent and 11 percent,
respectively, of consolidated net sales were made to
McKesson HBOC Inc., a major pharmaceutical and health
care products distributor; substantially all of these
sales were in the United States.
Foreign Operations
Foreign activities are carried out primarily through
wholly-owned subsidiaries wherever market potential is
adequate and circumstances permit. In addition, the
Company is represented in some markets through
licensees or other distribution arrangements. There
are approximately 14,500 employees outside the United
States.
Foreign operations are subject to certain risks which
are inherent in conducting business overseas. These
risks include possible nationalization, expropriation,
importation limitations and other restrictive
governmental actions. Also, fluctuations in foreign
currency exchange rates can impact the Company's
consolidated financial results. For additional
information on foreign operations, see "Management's
Discussion and Analysis of Operations and Financial
Condition" and "Segment Information" in the Company's
1999 Annual Report to Shareholders which is
incorporated herein by reference.
Research and Development
The Company's research activities are primarily aimed
at discovering and developing new and enhanced
prescription products of medical and commercial
significance. Company sponsored research and
development expenditures were $1,191 million, $1,007
million and $847 million in 1999, 1998, and 1997,
respectively. Research expenditures represented
approximately 13 percent of consolidated net sales in
each of the three years.
The Company's research activities are concentrated in
the therapeutic areas of allergic and inflammatory
disorders, infectious and cardiovascular diseases,
oncology and central nervous system disorders. The
Company also has substantial efforts directed toward
biotechnology, gene therapy and immunology. Research
activities include expenditures for both internal
research efforts and research collaborations with
various partners.
While several pharmaceutical compounds are in varying
stages of development, it cannot be predicted when or
if these compounds will become available for commercial
sale.
Government Regulation
Pharmaceutical companies are subject to extensive
regulation by a number of national, state and local
agencies. Of particular importance is the United
States Food and Drug Administration (FDA). It has
jurisdiction over all the Company's businesses and
administers requirements covering the testing,
approval, safety, effectiveness, manufacturing,
labeling and marketing of the Company's products. In
some cases, FDA requirements and/or reviews have
increased the amount of time and money necessary to
develop new products and bring them to market in the
United States.
On an ongoing basis the FDA regulates the facilities
and procedures used to manufacture pharmaceutical
products in the United States or for sale in the United
States. All products made in such facilities must be
manufactured in accordance with "good manufacturing
practices" established by the FDA. The FDA
periodically inspects the Company's facilities and
procedures to assure compliance.
Failure to comply with government regulations can
result in delays in the release of products, seizure or
recall of products, suspension or revocation of the
authority necessary for the production and sale of
products, fines and other civil or criminal sanctions.
The Company's activities outside the United States are
also subject to regulatory requirements governing the
testing, approval, safety, effectiveness,
manufacturing, labeling and marketing of the Company's
products, which requirements vary from country to
country. Whether or not FDA approval or approval of
the European Medicines Evaluation Agency has been
obtained for a product, approval of the product by
comparable regulatory authorities of countries outside
of the United States or the European Union, as the case
may be, must be obtained prior to marketing the product
in those countries. The approval process may be more
or less rigorous from country to country and the time
required for approval may be longer or shorter than
that required in the United States. Approval in one
country does not assure that such product will be
approved in another country.
In most international markets, the Company operates in
an environment of government-mandated, cost-containment
programs. Several governments have placed restrictions
on physician prescription levels and patient
reimbursements, emphasized greater use of generic drugs
and enacted across-the-board price cuts as methods of
cost control.
In recent years various legislative proposals have been
offered in Congress and in some state legislatures that
would effect major changes in the affected health care
systems. Some states have passed legislation, and
further federal and state proposals are possible.
These could include price or patient reimbursement
constraints on medicines and restrictions on access to
certain products. Similar issues have also arisen in
many countries outside of the United States. It is not
possible to predict the outcome of such initiatives and
their effect on operations and cash flows cannot be
reasonably estimated.
The Company is also subject to the jurisdiction of
various other regulatory and enforcement departments
and agencies, such as the Federal Trade Commission
(FTC), the Department of Justice and the Department of
Health and Human Services in the United States. The
Company is, therefore, subject to possible
administrative and legal proceedings and actions by
those organizations. Such actions may result in the
imposition of civil and criminal sanctions, which may
include fines, penalties and injunctive or
administrative remedies.
Environment
To date, compliance with federal, state and local
environmental protection laws has not had a materially
adverse effect on the Company. The Company has made
and will continue to make necessary expenditures for
environmental protection. Worldwide capital
expenditures during 1999 included approximately $7
million for environmental control purposes. It is
anticipated that continued compliance with such
environmental regulations will not significantly affect
the Company's financial statements or its competitive
position. For additional information on environmental
matters, see "Legal and Environmental Matters" in the
Notes to Consolidated Financial Statements in the
Company's 1999 Annual Report to Shareholders which is
incorporated herein by reference.
Employees
There were approximately 26,500 people employed by the
Company at December 31, 1999.
Cautionary Factors that May Affect Future Results
(Cautionary Statements Under the Private Securities
Litigation Reform Act of 1995)
This report and other written reports and oral
statement made from time-to-time by the Company may
contain so-called "forward-looking statements," all of
which are subject to risks and uncertainties. One can
identify these forward-looking statements by their use
of words such as "expects," "plans," "will,"
"estimates," "forecasts," "projects," "believes,"
"anticipates," and other words of similar meaning. One
can also identify them by the fact that they do not
relate strictly to historical or current facts. These
statements are likely to address the Company's growth
strategy, financial results, regulatory issues, product
approvals, development programs, litigation and
investigations. One must carefully consider any such
statement and should understand that many factors could
cause actual results to differ from the Company's
forward-looking statements. These factors include
inaccurate assumptions and a broad variety of other
risks and uncertainties, including some that are known
and some that are not. No forward-looking statement
can be guaranteed and actual future results may vary
materially. Although it is not possible to predict or
identify all such factors, they may include the
following:
- Competitive factors including technological
advances attained by competitors, patents granted
to competitors, new products of competitors coming
to the market, generic competition as the
Company's products mature and patent expiration on
products.
- Increased pricing pressure both in the United
States and abroad from managed care buyers,
institutions and government agencies. In the
United States, among other developments,
consolidation among customers may increase price
pressures and may result in various customers
having greater influence over prescription
decisions through formulary decisions and other
policies.
- Government laws and regulations (and changes in
laws and regulations) affecting domestic and
international operations and the enforcement
thereof including, among other laws and
regulations, those resulting from healthcare
reform initiatives in the United States at the
state and federal level and in other countries, as
well as laws and regulations relating to trade,
antitrust, monetary and fiscal policies, taxes,
price controls, and possible nationalization.
- Patent positions can be highly uncertain and
patent disputes are not unusual. An adverse
result in a patent dispute can preclude
commercialization of products or negatively impact
sales of existing products or result in injunctive
relief and payment of financial remedies.
- Uncertainties of the FDA approval process and
the regulatory approval processes of non-U.S.
countries, including, without limitation, delays
in approval of new products.
- Failure to meet "good manufacturing practices"
established by governmental authorities can result
in delays in the release of products, seizure or
recall of products, suspension or revocation of
the authority necessary for the production and
sale of products, fines and other civil or
criminal sanctions.
- Difficulties in product development.
Pharmaceutical product development is highly
uncertain. Products that appear promising in
development may fail to reach market for numerous
reasons. They may be found to be ineffective or
to have harmful side effects in clinical or pre-
clinical testing, they may fail to receive the
necessary regulatory approvals, they may turn out
not to be economically feasible because of
manufacturing costs or other factors or they may
be precluded from commercialization by the
proprietary rights of others.
- Efficacy or safety concerns with respect to
marketed products, whether or not scientifically
justified, leading to recalls, withdrawals or
declining sales.
- Major products such as CLARITIN and INTRON
A/REBETRON Combination Therapy accounted for a
material portion of the Company's 1999 revenues.
If any major product, such as CLARITIN and INTRON
A/REBETRON Combination Therapy, were to become
subject to a problem such as loss of patent
protection, previously unknown side effects or if
a new, more effective treatment should be
introduced, the impact on revenues could be
significant.
- Failure of the Company to foresee and correct
systems and commercial arrangements to address the
new European currency (euro).
- Legal factors, including product liability
claims and other litigation, government
investigations, patent disputes with competitors,
environmental concerns, any of which could
preclude commercialization of products or
negatively affect the profitability of existing
products.
- Economic factors over which the Company has no
control, including changes in inflation, interest
rates and foreign currency exchange rates.
- Changes in tax laws including changes related to
taxation of foreign earnings.
- Changes in accounting standards promulgated by
the American Institute of Certified Public
Accountants, the Financial Accounting Standards
Board or the Securities and Exchange Commission
that are adverse to the Company.
Item 2. Properties
The Company's corporate headquarters is located in
Madison, New Jersey. Principal manufacturing facilities
are located in Kenilworth, New Jersey, Miami, Florida,
Omaha, Nebraska, Cleveland, Tennessee, Puerto Rico,
Argentina, Australia, Belgium, Canada, Colombia,
France, Ireland, Italy, Japan, Mexico, Singapore and
Spain.
The Company's principal research facilities are located
in Kenilworth and Union, New Jersey, Palo Alto and San
Diego, California and Elkhorn, Nebraska.
The major portion of properties are owned by the
Company. These properties are well maintained,
adequately insured and in good operating condition. The
Company's manufacturing facilities have capacities
considered appropriate to meet the Company's needs.
Item 3. Legal Proceedings
Subsidiaries of the Company are defendants in 235
lawsuits involving approximately 400 plaintiffs arising
out of the use of synthetic estrogens by the mothers of
the plaintiffs. In virtually all of these lawsuits,
many other pharmaceutical companies are also named
defendants. The female plaintiffs claim various
injuries, including cancerous or precancerous lesions
of the vagina and cervix and a multiplicity of
pregnancy problems. A number of suits involve infants
with birth defects born to daughters whose mother took
the drug. The total amount claimed against all
defendants in all the suits amounts to more than $1.5
billion. While it is not possible to precisely predict
the outcome of these proceedings, it is management's
opinion that it is remote that any material liability
in excess of the amount accrued will be incurred.
The Company is a party to, or otherwise involved in,
environmental clean-up actions or proceedings under the
Comprehensive Environmental Response, Compensation and
Liability Act (commonly known as Superfund) or under
equivalent state laws. These actions or proceedings
seek to require the owners or operators of facilities
that treated, stored or disposed of hazardous
substances and transporters, and generators of such
substances to remediate contaminated facilities and/or
reimburse the government or private parties for their
clean-up costs. The Company, along with such owners,
operators, transporters and generators, is alleged to
be a potentially responsible party (PRP) as an alleged
generator of hazardous substances found at certain
facilities. In each proceeding, the government or
private litigants allege that any one PRP, including
the Company, is jointly and severally liable for all
clean-up requirements and costs. Although joint and
several liability is alleged, a PRP's share of clean-up
costs is frequently determined on the basis of several
factors, including the type and quantity of hazardous
substances; however, the allocation process varies
greatly from facility to facility and may take years to
complete. The Company's potential share of clean-up
costs also depends on how many other PRPs are involved
in the action or proceeding, insurance coverage,
available indemnity contracts and contribution rights
against other PRPs. While it is not possible to
predict with certainty the outcome of any action or
proceeding, it is management's opinion that it is
remote that any material liability in excess of amounts
accrued will be incurred.
The Company is a defendant in more than 110 antitrust
actions commenced (starting in 1993) in state and
federal courts by independent retail pharmacies, chain
retail pharmacies and consumers. The plaintiffs allege
price discrimination and/or conspiracy between the
Company and other defendants to restrain trade by
jointly refusing to sell prescription drugs at
discounted prices to the plaintiffs.
One of the federal cases is a class action on behalf of
approximately two-thirds of all retail pharmacies in
the United States and alleges a price-fixing
conspiracy. The Company agreed to settle the federal
class action for a total of $22 million, which has been
paid in full. The settlement provides, among other
things, that the Company shall not refuse to grant
discounts on brand-name prescription drugs to a
retailer based solely on its status as a retailer and
that, to the extent a retailer can demonstrate its
ability to affect market share of a Company brand-name
prescription drug in the same manner as a managed care
organization with which the retailer competes, it will
be entitled to negotiate similar incentives subject to
the rights, obligations, exemptions and defenses of the
Robinson-Patman Act and other laws and regulations.
The United States District Court in Illinois approved
the settlement of the federal class action in June
1996. In June 1997, the Seventh Circuit Court of
Appeals dismissed all appeals from that settlement, and
it is not subject to further review. The defendants
that did not settle the class action proceeded to trial
in September 1998. The trial ended in November 1998
with a directed verdict in the defendants' favor.
In April 1997, certain of the plaintiffs in the federal
class action commenced another purported class action
in United States District Court in Illinois against the
Company and the other defendants who settled the
previous federal class action. The complaint alleges
that the defendants conspired not to implement the
settlement commitments following the settlement
discussed above. The District Court has denied the
plaintiffs' motion for a preliminary injunction
hearing.
The Company has settled all of the state retailer
actions, except California and Alabama. The settlement
amounts were not material to the Company. In addition,
in June 1999, the Alabama Supreme Court reversed the
denial of a motion for judgment on the pleadings in the
Alabama retailer case. The court held that the Alabama
antitrust law did not apply to conspiracies alleged to
be in interstate commerce. Based on that ruling, the
Alabama retailer case has been dismissed.
The Company has settled all of the state consumer
cases, except Alabama, North Dakota, South Dakota, West
Virginia and New Mexico. The settlement amounts were
not material to the Company. A motion is pending to
dismiss the Alabama consumer case based on the Alabama
Supreme Court decision in the retailer case.
In May 1998, the Company settled six of the federal
antitrust cases brought by 26 food and drug chain
retailers and several independent retail stores.
Plaintiffs in these cases comprise collectively
approximately one-fifth of the prescription drug retail
market. Also in 1999, the Company settled federal
antitrust cases brought by independent pharmacists and
small pharmacy chains comprising about 2% of the
prescription drug retail market. The settlement
amounts were not material to the Company.
Plaintiffs in these antitrust actions generally seek
treble damages in an unspecified amount and an
injunction against the allegedly unlawful conduct.
The Company believes all the antitrust actions are
without merit and is defending itself vigorously.
In March, 1996, the Company was notified that the
United States Federal Trade Commission (FTC) is
investigating whether the Company, along with other
pharmaceutical companies, conspired to fix prescription
drug prices. The investigation is ongoing. The
Company believes that its actions have been lawful and
proper and is cooperating in the investigation.
However, it is not possible to predict the outcome of
the investigation which could result in the imposition
of fines, penalties and injunctive or administrative
remedies.
In October 1999, the Company received a subpoena from
the U.S. Attorney's Office for the Eastern District of
Pennsylvania, pursuant to the Health Insurance
Portability and Accountability Act of 1996, concerning
the Company's contracts with pharmacy benefit managers
(PBMs) and managed care organizations to provide
disease management services in connection with the
marketing of its pharmaceutical products. It appears
that the subpoena is one of a number addressed to
industry participants including PBMs, managed care
organizations and manufacturers as a part of an inquiry
into, among other things, marketing practices. The
government's inquiry appears to focus on whether the
Company's disease management and other marketing
programs comply with federal health care laws and
whether the value of its disease management programs
should have been included in the calculation of rebates
to the government. The Company believes that its
disease management and other marketing programs have
been designed to comply with the law and that its
rebate calculations have properly excluded the value of
its disease management programs. The Company is
cooperating in the investigation. However, it is not
possible to predict the outcome of the investigation,
which could include the imposition of fines, penalties
and injunctive or administrative remedies. Nor can the
Company predict whether the investigation will affect
its marketing practices or sales.
The Company is a party to an arbitration filed by
Biogen, Inc. (Biogen) in a dispute over the method used
by the Company to determine the amount of royalties
payable to Biogen on sales of REBETRON Combination
Therapy containing REBETOL Capsules and INTRON A
Injection. The Company believes that it should prevail
in this arbitration. However, there can be no
assurance that the Company will prevail.
In February 1998, Geneva Pharmaceuticals, Inc. (Geneva)
submitted an Abbreviated New Drug Application (ANDA) to
the U.S. Food and Drug Administration (FDA) seeking to
market a generic form of CLARITIN in the United States
several years before the expiration of the Company's
patents. Geneva has alleged that certain of the
Company's U.S. CLARITIN patents are invalid and
unenforceable. The CLARITIN patents are material to
the Company's business. In March 1998, the Company
filed suit in federal court seeking a ruling that
Geneva's ANDA submission constitutes willful
infringement of the Company's patents and that its
challenge to the Company's patents is without merit.
The Company believes that it should prevail in the
suit. However, as with any litigation, there can be no
assurance that the Company will prevail.
During 1999, Copley Pharmaceutical, Inc., Teva
Pharmaceuticals, Inc., Novex Pharma and Zenith Goldline
Pharmaceuticals individually notified the Company that
each had submitted an ANDA to the FDA seeking to market
certain generic forms of CLARITIN in the United States
before the expiration of certain of the Company's
patents, and in 2000 Andrx Pharmaceuticals, L.L.C.
(Andrx) made a similar submission relating to CLARITIN-
D 24 Hour tablets. Each has alleged that one or more
of those patents are invalid and unenforceable. In
each case, except Andrx, the Company has filed suit in
federal court seeking a ruling that the applicable ANDA
submission and proposed marketing of a generic product
constitute willful infringement of the Company's patent
and that the challenge to the patent is without merit.
The Company will file a similar suit against Andrx in
federal court. The Company believes that it should
prevail in these suits. However, as with any
litigation, there can be no assurance that the Company
will prevail.
In January 2000, Hoffmann-La Roche Inc. filed actions
against the Company in United States District Court in
New Jersey and in France alleging that the Company's
PEG-INTRON (peginterferon alfa-2b) infringes Hoffmann-
La Roche Inc.'s patents on certain pegylated
interferons. The Company believes that it should
prevail in these suits. However, as with any
litigation, there can be no assurance that the Company
will prevail.
Item 4. Submission of Matters to a Vote of Security
Holders
Not applicable.
Executive Officers of the Registrant
The following information regarding executive officers is
included herein in accordance with Part III, Item 10.
Officers are elected to serve for one year and until their
successors shall have been duly elected.
Name and Current Position Business Experience Age
Richard Jay Kogan Present position 1998; 58
Chairman of the Board President and Chief Executive
and Chief Executive Officer Officer 1996-1998; President
and Chief Operating Officer
1986-1995
Raul E. Cesan Present position 1998; 52
President and Chief Executive Vice President
Operating Officer and President Schering-
Plough Pharmaceuticals
1994-1998
Hugh A. D'Andrade Present position 1996; 61
Vice Chairman and Executive Vice President
Chief Administrative Officer Administration 1984-1995
Joseph C. Connors Present position 1996; 51
Executive Vice President Senior Vice President and
and General Counsel General Counsel 1992-1995
Jack L. Wyszomierski Present position 1996; 44
Executive Vice President Vice President and Treasurer
and Chief Financial Officer 1991-1995
Geraldine U. Foster Present position 1994; 57
Senior Vice President Vice President - Investor
Investor Relations and Relations 1988-1994
Corporate Communications
Daniel A. Nichols Present position 1991 59
Senior Vice President
Taxes
John P. Ryan Present position 1998; 59
Senior Vice President Vice President-Human Resources
Human Resources Schering-Plough Pharmaceuticals
1988-1998
Douglas J. Gingerella Present position 1999; 41
Vice President, Corporate Staff Vice President, Corporate
Audits Audits 1995-1998; Director
Corporate Audits 1991-1995
Thomas H. Kelly Present position 1991 50
Vice President and
Controller
Robert S. Lyons Present position 1991 59
Vice President
Corporate Information
Services
E. Kevin Moore Present position 1996; 47
Vice President and Staff Vice President and
Treasurer Assistant Treasurer 1993-1995;
Treasurer-Europe, The Dun and
Bradstreet Corporation 1990-1993
John E. Nine Present position 1996; 63
Vice President President - Technical Operations
and President, Schering Schering Laboratories 1990-1995
Technical Operations
William J. Silbey Present position 1996; 40
Staff Vice President, Corporate Counsel 1993-1995;
Secretary and Associate Partner - Stearns, Weaver, Miller,
General Counsel Weissler, Alhadeff & Sitterson,
P.A. 1992-1993
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
The common share dividends and share price data as set
forth in the Company's 1999 Annual Report to
Shareholders are incorporated herein by reference.
Item 6. Selected Financial Data
The Six-Year Selected Financial & Statistical Data as set
forth in the Company's 1999 Annual Report to
Shareholders is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Management's Discussion and Analysis of Operations and
Financial Condition as set forth in the Company's 1999
Annual Report to Shareholders is incorporated herein by
reference.
Item 7(a). Quantitative and Qualitative Disclosures about
Market Risk
The Market Risk Disclosures as set forth in Management's
Discussion and Analysis of Operations and Financial
Condition in the Company's 1999 Annual Report to
Shareholders is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The Consolidated Balance Sheets as of December 31, 1999
and 1998, and the related Statements of Consolidated
Income, Consolidated Shareholders' Equity and
Consolidated Cash Flows for each of the three years in
the period ended December 31, 1999, Notes to
Consolidated Financial Statements, the Independent
Auditors' Report of Deloitte & Touche LLP dated
February 11, 2000 and Quarterly Data, as set forth in
the Company's 1999 Annual Report to Shareholders, are
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Not applicable.
Part III
Item 10. Directors and Executive Officers of the Registrant
The information concerning directors and nominees for
directors as set forth in the Company's Proxy Statement
for the annual meeting of shareholders on April 25,
2000 is incorporated herein by reference.
Information required as to executive officers is included
in Part I of this filing under the caption "Executive
Officers of the Registrant."
Item 11. Executive Compensation
Executive compensation information as set forth in the
Company's Proxy Statement for the annual meeting of
shareholders on April 25, 2000 is incorporated herein
by reference.
Item 12. Security Ownership of Certain Beneficial Owners
and Management
Information concerning security ownership of certain
beneficial owners and management as set forth in the
Company's Proxy Statement for the annual meeting of
shareholders on April 25, 2000 is incorporated herein
by reference.
Item 13. Certain Relationships and Related Transactions
None
Part IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
(a) 1. Financial Statements
The following consolidated financial statements and
independent auditors' report, included in the Company's
1999 Annual Report to Shareholders, are incorporated
herein by reference.
Statements of Consolidated Income For the
Years Ended December 31, 1999, 1998 and 1997
Statements of Consolidated Shareholders' Equity For the
Years Ended December 31, 1999, 1998 and 1997
Statements of Consolidated Cash Flows For the Years
Ended December 31, 1999, 1998 and 1997
Consolidated Balance Sheets at December 31, 1999 and
1998
Notes to Consolidated Financial Statements
Independent Auditors' Report
(a) 2. Financial Statement Schedules
Page in
Form 10-K
Independent Auditors' Report . . . . . . . . . . . 24
Schedule II - Valuation and Qualifying Accounts. . 25
Schedules not included have been omitted because they are
not applicable or not required or because the required
information is set forth in the financial statements or
the notes thereto. Columns omitted from schedules
filed have been omitted because the information is not
applicable.
Financial statements of fifty percent or less owned
companies accounted for by the equity method have been
omitted because, considered individually or in the
aggregate, they do not constitute a significant
subsidiary.
(a) 3. Exhibits
Exhibit
Number Description
3(a) A complete copy of the Certificate of Incorporation
as amended and currently in effect. Incorporated by
reference to Exhibit 3 (i) to the Company's
Quarterly Report for the period ended June
30, 1995 on Form 10-Q; Certificate of Amendment
of Certificate of Incorporation incorporated by
reference to Exhibit 3 to the Company's
Quarterly Report for the period ended June
30, 1997 on Form 10-Q; Certificate of
Amendment of Certificate of Incorporation
incorporated by reference to Exhibit 3(a) to
the Company's Quarterly Report for the period
ended March 31, 1999 on Form 10-Q, File No. 1-6571.
3(b) A complete copy of the By-Laws as amended and
currently in effect. Incorporated by reference to
Exhibit 4(2) to the Company's Registration Statement
on Form S-3, File No. 333-853; amendment to By-Laws
effective September 22, 1998 incorporated by reference
to Exhibit 4 to the Company's Quarterly Report for the
period ended September 30, 1998 on Form 10-Q, File No.
1-6571.
4(a) Rights Agreement between the Company and The Bank of
New York dated June 24, 1997. Incorporated by
reference to Exhibit 1 to the Form 8-A filed by the
Company on June 30, 1997, File No. 1-6571.
4(b) Indenture dated as of November 1, 1982 between the
Company and The Chase Manhattan Bank, N.A. as
Trustee. Incorporated by reference to Exhibit 4(a)to
the Company's Registration Statement on Form S-3, File
No. 2-80012.
4(c) Form of Participation Rights Agreement between the
Company and The Chase Manhattan Bank (National
Association), as Trustee. Incorporated by reference
to Exhibit 4.6 to the Company's Registration
Statement on Form S-4, Amendment No. 1, File
No. 33-65107.
10(a) The Company's Executive Incentive Plan (as amended)
and Trust related thereto.* Plan incorporated by
reference to Exhibit 10 to the Company's Quarterly
Report for the period ended March 31, 1994 on
Form 10-Q; Trust Agreement incorporated by
reference to Exhibit 10(a) to the Company's Annual
Report for 1988 on Form 10-K; amendment to Trust
Agreement incorporated by reference to Exhibit 10(b)
to the Company's Quarterly Report for the period
ended March 31, 1997 on Form 10-Q, File No. 1-6571.
10(b) The Company's 1987 Stock Incentive Plan (as
amended).* Incorporated by reference to Exhibit
10(d) to the Company's Annual Report for 1990 on
Form 10-K, File No. 1-6571.
10(c) The Company's 1992 Stock Incentive Plan (as amended).*
Incorporated by reference to Exhibit 10(d) to the
Company's Annual Report for 1992 on Form 10-K, File
No. 1-6571; amendment of December 11, 1995
incorporated by reference to Exhibit 10(d)to the
Company's Annual Report for 1995 on Form 10-K, File
No. 1-6571.
10(d) The Company's 1997 Stock Incentive Plan.*
Incorporated by reference to Exhibit 10 to the
Company's Quarterly Report for the period ended
September 30, 1997 on Form 10-Q; Amendment to 1997
Stock Incentive Plan incorporated by reference to
Exhibit 10(a) to the Company's Quarterly Report
for the period ended March 31, 1999 on Form 10-Q,
File No. 1-6571.
10(e)(i) Employment agreement between the Company and Richard
J. Kogan (as amended).* Incorporated by reference to
Exhibit 10(e)(ii) to the Company's Annual Report
for 1989 on Form 10-K; first amendment incorporated
by reference to Exhibit 10(b) to the Company's
Quarterly Report for the period ended June 30, 1994
on Form 10-Q; second amendment incorporated by
reference to Exhibit 10(e)(ii) to the Company's
Annual Report for 1994 on Form 10-K; third amendment
incorporated by reference to Exhibit 10(a) to the
Company's Quarterly Report for the period ended
September 30, 1995 on Form 10-Q; fourth amendment
incorporated by reference to Exhibit 10(b) to the
Company's Quarterly Report for the period ended March
31, 1998 on Form 10-Q; fifth amendment incorporated by
reference to Exhibit 10(e)(ii) to the Company's Annual
Report for 1998 on Form 10-K, File No. 1-6571.
10(e)(ii) Employment agreement between the Company and Hugh A.
D'Andrade (as amended).* Incorporated by
reference to Exhibit 10(c) to the Company's
Quarterly Report for the period ended June 30, 1994
on Form 10-Q; first amendment incorporated by
reference to Exhibit 10(e)(iii) to the Company's
Annual Report for 1994 on Form 10-K, File No.
1-6571; second amendment incorporated by reference to
Exhibit 10(e)(iii) to the Company's Annual Report for
1995 on Form 10-K; third amendment incorporated by
reference to Exhibit 10(c) to the Company's Quarterly
Report for the period ended March 31, 1998 on Form
10-Q; fourth amendment incorporated by reference to
Exhibit 10(e)(iii) to the Company's Annual Report for
1998 on Form 10-K, File No. 1-6571.
10(e)(iii) Form of employment agreement between the Company and
its executive officers effective upon a change of
control.* Incorporated by reference to Exhibit
10(e)(iv) to the Company's Annual Report for 1994 on
Form 10-K; Form of amendment incorporated by reference
to Exhibit 10(a) to the Company's Quarterly Report for
the period ended September 30, 1999 on Form 10-Q, File
No. 1-6571.
10(e)(iv) Employment agreement between the Company and Raul E.
Cesan.* Incorporated by reference to Exhibit 10(e)(vi)
to the Company's Annual Report for 1998 on Form 10-K,
File No. 1-6571.
10(e)(v) Employment agreement between the Company and Robert P.
Luciano (as amended).* Incorporated by reference to
Exhibit 10(e)(i) to the Company's Annual Report for
1989 on Form 10-K; first amendment incorporated by
reference to Exhibit 10(a) to the Company's Quarterly
Report for the period ended June 30, 1994 on Form 10-Q;
second amendment incorporated by reference 10(e)(i) to
the Company's Annual Report for 1994 on Form 10-K;
third amendment incorporated by reference to
Exhibit 10(a) to the Company's Quarterly Report for
the period ended March 31, 1998 on Form 10-Q,
File No. 1-6571.
10(e)vi Agreement between the Company and Robert P. Luciano.*
Incorporated by reference to Exhibit 10(d) to the
Company's Quarterly Report for the period ended March
31, 1998 on Form 10-Q, File No. 1-6571.
10(f) Amended and Restated Directors Deferred Compensation
Plan and Trust related thereto.* Incorporated by
reference to Exhibit 10 (b) to the Company's Quarterly
Report for the period ended September 30, 1999 on Form
10-Q; Trust Agreement incorporated by reference to
Exhibit 10 (a) to the Company's Annual Report for 1998
on Form 10-K; amendment to Trust Agreement incorporated
by reference to Exhibit 10 (b) to the Company's
Quarterly Report for the period ended March 31, 1997 on
Form 10-Q, File No. 1-6571.
10(g) Supplemental Executive Retirement Plan and Trust
related thereto.* Incorporated by reference to Exhibit
10(e) to the Company's Quarterly Report for the period
ended March 31, 1998 on Form 10-Q; amendment
incorporated by reference to Exhibit 10(a) to the
Company's Quarterly Report for the period ended
September 30, 1998 on Form 10-Q; Amended
and Restated Trust Agreement incorporated by reference
to Exhibit 10(g)to the Company's Annual Report for 1998
on Form 10-K, File No. 1-6571.
10(h) Amended and Restated Directors' Stock Award Plan.*
Incorporated by reference to Exhibit 10 (c)to the
Company's Quarterly Report for the period ended
September 30, 1999 on Form 10-Q, File No. 1-6571.
10(i) Deferred Compensation Plan.* Incorporated by reference
to Exhibit 10(b) to the Company's Quarterly Report for
the period ended September 30, 1995 on Form 10-Q, File
No. 1-6571.
10(j) Amended and Restated Directors Deferred Stock
Equivalency Program.* Incorporated by reference to
Exhibit 10(d) to the Company's Quarterly Report for the
period ended September 30, 1999 on Form 10-Q, File No.
1-6571.
10(k) The Company's Form of Split Dollar Agreement and
related Collateral Assignment between the Company and
its Executive Officers.* Incorporated by reference to
Exhibit 10(l) to the Company's Annual Report for 1997
on Form 10-K; amendments incorporated by reference to
Exhibit 10(g) to the Company's Quarterly Report for the
period ended March 31, 1998 on Form 10-Q, File No.
1-6571.
10(l) The Company's Retirement Benefits Equalization Plan.*
Incorporated by reference to Exhibit 10(f) to the
Company's Quarterly Report for the period ended March
31, 1998 on Form 10-Q; amendment incorporated by
reference to Exhibit 10(b) to the Company's Quarterly
Report for the period ended September 30, 1998 on Form
10-Q, File No. 1-6571.
12 Computation of Ratio of Earnings to Fixed Charges
(filed with this document).
13 The Financial Section of the Company's 1999 Annual
Report to Shareholders. With the exception of those
portions of said Annual Report which are specifically
incorporated by reference in this Form 10-K (filed with
this document),such report shall not be deemed filed as
part of this Form 10-K.
21 Subsidiaries of the registrant (filed with this
document).
23 Consents of experts and counsel (filed with this
document).
24 Power of attorney (filed with this document).
27 Financial Data Schedule (filed with this document).
All other exhibits are not applicable. Copies of above
exhibits will be furnished upon request.
* Compensatory plan, contract or arrangement.
(b) Reports on Form 8-K.
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized
Schering-Plough Corporation
(Registrant)
Date March 2, 2000 By /s/ Thomas H. Kelly
Thomas H. Kelly
Vice President and Controller
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the date
indicated.
By * By *
Richard Jay Kogan Donald L. Miller
Chairman of the Board and Chief Director
Executive Officer and Director
By * By *
Raul E. Cesan H. Barclay Morley
President and Chief Operating Director
Officer and Director
By * By *
Jack L. Wyszomierski Carl E. Mundy, Jr.
Executive Vice President and Director
Chief Financial Officer
By * By *
Thomas H. Kelly Richard de J. Osborne
Vice President and Controller Director
and Principal Accounting Officer
By * By *
Hans W. Becherer Patricia F. Russo
Director Director
By * By *
Hugh A. D'Andrade William A. Schreyer
Director Director
By * By *
David C. Garfield Robert F. W. van Oordt
Director Director
By * By *
Regina E. Herzlinger Arthur F. Weinbach
Director Director
By * By *
Robert P. Luciano James Wood
Director Director
*By /s/Thomas H. Kelly Date: March 2, 2000
Thomas H. Kelly
Attorney-in-fact
INDEPENDENT AUDITORS' REPORT
Schering-Plough Corporation:
We have audited the financial statements of Schering-
Plough Corporation and subsidiaries as of December 31,
1999 and 1998, and for each of the three years in the
period ended December 31, 1999, and have issued our
report thereon dated February 11, 2000; such financial
statements and report are included in your 1999 Annual
Report to Shareholders and are incorporated herein by
reference. Our audits also included the financial
statement schedule of Schering-Plough Corporation and
subsidiaries, listed in Item 14. This financial
statement schedule is the responsibility of the
Company's management. Our responsibility is to express
an opinion based on our audits. In our opinion, such
financial statement schedule, when considered in
relation to the basic financial statements taken as a
whole, presents fairly in all material respects the
information set forth therein.
/s/DELOITTE & TOUCHE LLP
Parsippany, New Jersey
February 11, 2000
SCHEDULE II
SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(Dollars in millions)
Valuation and qualifying accounts deducted from assets to which
they apply:
Allowances for accounts receivable:
RESERVE RESERVE RESERVE
FOR DOUBTFUL FOR CASH FOR CLAIMS
ACCOUNTS DISCOUNTS AND OTHER TOTAL
1999
Balance at beginning of
year $ 51 $ 18 $ 29 $ 98
Additions:
Charged to costs and
expenses 17 146 12 175
Deductions from reserves (8) (142) (30) (180)
Effects of foreign
exchange (1) - - (1)
Balance at end of year $ 59 $ 22 $ 11 $ 92
1998
Balance at beginning of
year $ 49 $ 14 $ 24 $ 87
Additions:
Charged to costs and
expenses 14 133 19 166
Deductions from reserves (12) (129) (14) (155)
Balance at end of year $ 51 $ 18 $ 29 $ 98
1997
Balance at beginning of
year $ 50 $ 12 $ 11 $ 73
Additions:
Charged to costs and
expenses 17 103 20 140
Deductions from reserves (18) (101) (7) (126)
Balance at end of year $ 49 $ 14 $ 24 $ 87