Exhibit 99.1
[Logo Schering-Plough]
News Release
Schering-Plough Corporation
2000 Galloping Hill Road
Kenilworth, New Jersey 07033-0530
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FOR RELEASE: IMMEDIATELY Media Contact: Steve Galpin, Jr.
(908) 298-7415
Investor Contacts: Alex Kelly
Lisa W. DeBerardine
Janet M. Barth
(908) 298-7436
SCHERING-PLOUGH REPORTS FINANCIAL RESULTS FOR 2004 SECOND QUARTER
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KENILWORTH, N.J., July 21, 2004 - Schering-Plough Corporation (NYSE: SGP) today
reported financial results for the 2004 second quarter, including lower
comparative sales and earnings versus the 2003 period. The financial results
reflect difficult comparisons with the year-ago period and were affected by
several factors, including: lower sales for certain key profit-generating
products and the impact from the loss of U.S. exclusivity on REBETOL for
hepatitis C; an expense related to a licensing agreement for a new antibiotic in
development; the absence of LOSEC revenues; higher interest expense from the
long-term debt issued in the 2003 fourth-quarter; investments in sales and
marketing support; additional spending in connection with Food and Drug
Administration (FDA) consent decree, compliance and quality-systems obligations;
and costs associated with efforts to reduce overall payroll and related
expenses.
"Second quarter results are consistent with the tough financial comparisons
we expected for 2004," said Fred Hassan, Schering-Plough chairman and CEO.
"While we still expect 2004 to be a difficult year and for earnings - excluding
unusual items - to be below those of 2003, we are also starting to see some
early signs of sequential stabilization versus the prior quarter. We are
encouraged by the continuing steady growth of ZETIA for high cholesterol. And we
are looking forward to the U.S. approval and launch of our cholesterol-lowering
agent VYTORIN, which will offer patients a powerful new treatment option for
high cholesterol. The potential of this exciting product may also benefit from
the new and more aggressive cholesterol-lowering recommendations just issued by
health experts for patients at high risk of heart attacks. We have said that
VYTORIN will be pivotal to achieving our anticipated turnaround beginning in
2005, so its U.S. approval will mark an important event for this company."
VYTORIN (ezetimibe/simvastatin) is a new cholesterol-lowering therapy being
developed and marketed in partnership with Merck & Co., Inc. VYTORIN contains
ZETIA (ezetimibe), a cholesterol-absorption inhibitor discovered by
Schering-Plough, and Merck's Zocor (simvastatin) statin product in a single
tablet. The dual-inhibition product has been approved for marketing in several
countries, including Germany and Mexico. Clinical trials have shown that
patients taking ezetimibe with simvastatin achieved significantly greater
reductions in LDL cholesterol across the dosing ranges studied than leading
statin therapies. As a result, VYTORIN is expected to be well positioned to
compete in the critical and growing high-efficacy space of the
cholesterol-lowering market, especially now with new recommendations for even
lower LDL cholesterol goals.
"Physicians' positive experience with ZETIA is generating enthusiasm in the
marketplace," Hassan added. "With our partner Merck, we look forward to a
successful launch of VYTORIN in the world's largest pharmaceutical market and
the world's largest treatment category."
Hassan said Schering-Plough is relentlessly pursuing cost reductions in
conjunction with its drive to upgrade the company's global infrastructure in
facilities, technologies and organizational teams. "We have achieved the goal we
set for ourselves with the Value Enhancement Initiative," said Hassan, "and
we're continuing to look for ways to extract costs that can be reinvested more
productively elsewhere." Announced in August 2003, the VEI program was designed
to increase efficiencies and achieve annual savings in excess of $200 million
that can then be reinvested. Savings are being reinvested in growth-driving
priorities in research, manufacturing and compliance, licensing and other
opportunities, and in strengthening the company's sales forces to prepare for
the global launch of VYTORIN.
"Although we still face considerable challenges, I am pleased with the
overall progress we are making," added Hassan. "We are working through the
Stabilization and Repair phases of our five-stage Action Agenda and continue to
look forward to a turnaround anticipated to begin in 2005. Our commitment to
business integrity, quality and compliance remains at the center of this
strategy."
Second Quarter 2004 Results
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Schering-Plough reported a loss for the 2004 second quarter of $65 million or 4
cents in diluted earnings per share compared with net income of $182 million and
diluted earnings per share of 12 cents in the 2003 period. The company recorded
a charge to R&D expense in the 2004 second quarter of $80 million, or 4 cents
per diluted share (as measured using the company's effective tax rate), related
to an upfront payment in conjunction with the licensing from Toyama Chemical Co.
Ltd. of garenoxacin, a quinolone antibiotic in development. Special charges in
the 2004 second quarter totaled $42 million or
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2 cents per diluted share (as measured using the company's effective tax rate).
The special charges related to employee-termination costs stemming from
reductions in the company's global workforce.
Second quarter 2004 net sales of $2.1 billion were 7 percent lower than the
$2.3 billion in the 2003 period and included a favorable foreign exchange impact
of 3 percent. Second quarter sales of Prescription Pharmaceuticals totaled $1.6
billion, down 12 percent, while Consumer Health Care sales rose 19 percent to
$317 million and Animal Health sales grew 9 percent to $186 million.
Consolidated U.S. net sales were $827 million, down 21 percent, and net sales
outside the United States were $1.3 billion, up 5 percent, including a 6 percent
favorable impact from foreign exchange and the seasonal aspect of the allergy
business. Outside the United States, sales for the second quarter of 2004
reflected unfavorable comparisons due to the absence of LOSEC revenues in
Europe, as the company's agreement with AstraZeneca ended in the 2003 third
quarter; LOSEC revenues in the 2003 second quarter were $39 million.
Global cholesterol franchise sales, which include ZETIA and VYTORIN,
totaled $247 million in the 2004 second quarter compared with sales of $123
million in the comparable 2003 period. ZETIA has now been approved in 65
countries. In the United States, more than 9 million prescriptions have been
written for the product since its U.S. launch in November 2002, according to IMS
Health. The company utilizes the equity method of accounting for its cholesterol
joint venture with Merck. Under the equity method, the company records its share
of the operating profits less its share of the research and development costs in
"Equity income from cholesterol joint venture." U.S. ZETIA sales exceeded a
pre-defined annual sales level, as stipulated in the joint venture contract,
during the second quarter of 2004. As a result, profit from U.S. sales of ZETIA
will be split 50/50 for the remainder of the year, down from a previously higher
profit split. "Equity income from cholesterol joint venture" for Schering-Plough
totaled $77 million in the 2004 second quarter. Operating profit excludes the
cost of the company's sales forces throughout the world. The company noted that
it incurs substantial costs, such as selling, general and administrative costs,
that are not reflected in the "Equity income from cholesterol joint venture" and
are borne by the overall cost structure of Schering-Plough.
Prescription Pharmaceuticals sales in the 2004 second quarter reflected a
significant decline in sales for the company's hepatitis C products versus the
year-ago period, as expected, due to ongoing competition in a market that has
been contracting. Global sales of PEG-INTRON were down 42 percent to $144
million. Sales of REBETOL were down 55 percent to $88 million due to branded
competition and the 2004 second quarter launch of U.S. generic competition,
which is expected to result in sharply reduced REBETOL sales going forward. The
company has been successful in gaining acceptance by physicians and patients of
its new PEG-INTRON REDIPEN precision-dosing pen for hepatitis C patients
following the product's February launch in the U.S. market.
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The company's allergy franchise continued to face intense competitive
pressures in the United States. Second quarter 2004 global CLARINEX sales were
$226 million, up 3 percent. Sales outside the United States climbed 34 percent
to $100 million in the second quarter due to market share gains and continued
conversion from prescription CLARITIN. U.S. sales declined 13 percent to $126
million due to the continued contraction in the U.S. prescription antihistamine
market, stemming from the late-2002 introduction of over-the-counter (OTC)
CLARITIN and other branded and non-branded nonsedating antihistamines, coupled
with market share declines. Global NASONEX sales were down 11 percent to $156
million primarily due to trade buying patterns in 2003 coupled with a decline in
U.S. market share. In international markets, NASONEX sales of $71 million were
18 percent higher due to market share gains and market growth.
Leading the prescription products recording higher sales in the 2004 second
quarter was REMICADE, a treatment for immune-mediated inflammatory disorders
that Schering-Plough markets in countries outside the United States (excluding
Japan and certain Far East markets) for rheumatoid arthritis, Crohn's disease
and ankylosing spondylitis. REMICADE sales in the 2004 second quarter rose 44
percent to $182 million, benefiting from greater medical use and expanded
indications. Oncology products posting higher sales in the quarter included
TEMODAR, a treatment for certain types of brain tumors, up 17 percent to $102
million; and CAELYX, for the treatment of ovarian cancer, metastatic breast
cancer and Kaposi's sarcoma, up 34 percent to $35 million. Sales of SUBUTEX, a
treatment for opiate addiction sold in certain countries outside the United
States, rose 31 percent to $47 million.
In Consumer Health Care, sales rose 19 percent to $317 million in the
second quarter. Sales of OTC CLARITIN rose 22 percent to $117 million in the
second quarter primarily due to trade inventory adjustments in the second
quarter of 2003. Sun care sales rose 60 percent to $78 million due to the timing
of orders and shipments, coupled with favorable weather conditions. Sales of
foot care products rose 7 percent to $89 million.
Sales of Animal Health products totaled $186 million in the second quarter
of 2004, up 9 percent, including a favorable foreign exchange impact of 6
percent.
The company's ratio of gross margin to sales was 63.2 percent for the 2004
second quarter versus 66.0 percent in the 2003 period. The lower ratio was
primarily due to: lower production volumes coupled with increased spending
related to the FDA consent decree and efforts to upgrade the company's global
infrastructure; an unfavorable change in product sales mix (primarily higher
sales of lower-margin products); and the absence of European LOSEC revenues. On
a sequential basis, the company noted that the second quarter gross margin ratio
was consistent with the prior quarter after factoring in the impact of
seasonality with respect to CLARINEX sales. Schering-Plough said its
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ongoing focus on operational excellence in all key functions, including
compliance and quality, continues to increase the overall cost structure of the
company.
Selling, general and administrative expenses rose 4 percent to $979 million
in the second quarter of 2004, primarily reflecting the expansion of the field
force to prepare for the VYTORIN launch as well as the impact of foreign
exchange.
Research and development spending for the second quarter totaled $451
million, up 22 percent, including the $80 million milestone payment related to
the Toyama agreement.
The "Other, net" line reflects higher net interest expense from increased
borrowings including higher borrowing costs associated with the long-term debt
issued in the 2003 fourth quarter. As of June 30, 2004, the estimated annual
effective tax rate was approximately 20 percent.
Recent Developments
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The company also reviewed recent significant developments, including:
o European Union approval in June of REMICADE as first-line therapy for the
treatment of early rheumatoid arthritis in combination with methotrexate.
o New Drug Application (NDA) for posaconazole oral suspension accepted for
filing in July by the FDA for the treatment of certain invasive fungal
infections in patients 13 years of age and older. The NDA was submitted to
FDA in May.
o Definitive license agreement reached in June with Toyama Chemical Co. Ltd.
for garenoxacin, Toyama's proprietary quinolone antibacterial agent in
late-stage development. Under the agreement, Toyama granted Schering-Plough
exclusive rights to develop, use and sell garenoxacin worldwide, excluding
Japan, Korea and China.
o Positive clinical results reported in June at the American Society of
Clinical Oncology on TEMODAR (temozolomide) in increasing survival rates
when used with radiation as first-line treatment in patients with
glioblastoma multiforme, a common and aggressive form of brain cancer.
o Positive opinion issued in June by European Medicines Agency recommending
approval of a shorter 24-week course of PEG-INTRON and REBETOL combination
therapy for patients chronically infected with hepatitis C virus genotypes
2 or 3.
o In light of changing research and development priorities, a decision was
made to seek outside partners for the future development of a pure
anti-estrogen. Post-menopausal studies in Phase II had been on hold pending
the outcome of FDA guidance on hormone replacement therapy products. This
agent will no longer appear on the company's published Product Pipeline.
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o Agreement reached in June with the U.S. Securities and Exchange Commission
(SEC) to settle issues related to compliance with the books and records and
internal accounting control provisions of the U.S. Foreign Corrupt
Practices Act by a Schering-Plough subsidiary in Poland.
o Agreement reached in May with the Attorney General's Office of the State of
Texas to settle issues related to reimbursement by Texas' Medicaid program
of albuterol sulfate solution and inhaler asthma products.
o Moody's Investor Service on July 14 lowered its long-term senior unsecured
credit rating on the company from "A3" to "Baa1" and confirmed its
short-term credit rating of "Prime-2." Moody's reported that the company's
ratings outlook is negative.
Second Quarter 2004 Conference Call and Webcast
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Schering-Plough will conduct a conference call today at 7 a.m. (EDT) to
review the second quarter results. To listen live to the call, dial
1-706-634-5003. A replay of the call will be available starting at approximately
10 a.m. on July 21 through 5 p.m. on July 23. To listen to the replay, dial
1-706-645-9291 and enter the conference ID #7994435.
A live audio webcast of the conference call also will be available to all
interested parties by going to the Investor Relations section of the
Schering-Plough corporate Web site, www.schering-plough.com, and clicking on the
"Presentations/Webcasts" link. A replay of the webcast will be available
starting at approximately 11 a.m. on July 21 through 5 p.m. on July 28.
DISCLOSURE NOTICE: The information in this press release includes certain
"forward-looking" statements relating to the company's business prospects,
earnings outlook, anticipated turnaround and resulting growth prospects, and
savings goals relating to productivity and efficiency initiatives. Actual
results may differ materially from forward-looking statements due to a number of
risks and uncertainties, including the market viability of the company's
marketed and pipeline products, including the current and pipeline products in
the company's joint venture with Merck; possible changes in business strategies
and the ability to successfully implement those business strategies; general
market and economic factors; competitive product development; market acceptance
of new products; product availability; current and future branded, generic or
OTC competition; federal and state regulations and legislation; the research and
regulatory processes for new products and indications; existing and new
manufacturing issues that may arise; trade buying patterns; patent positions;
litigation and investigations; and instability or destruction in a geographic
area important to the company due to reasons such as war. For further details
and a discussion of these and other risks and uncertainties, see the company's
past and future Securities and Exchange Commission filings,
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including the company's 8-K being filed today. The company does not assume any
obligation to update any forward-looking statements.
Schering-Plough is a global science-based health care company with leading
prescription, consumer and animal health products. Through internal research and
collaborations with partners, Schering-Plough discovers, develops, manufactures
and markets advanced drug therapies to meet important medical needs.
Schering-Plough's vision is to earn the trust of the physicians, patients and
customers served by its more than 30,000 people around the world.
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SCHERING-PLOUGH CORPORATION
Report for the second quarter ended June 30 (unaudited):
(Amounts in millions, except per share figures)
Second Quarter Six Months
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2004 2003 % 2004 2003 %
------- ------- -- ------- ------- --
Net Sales .......................... $ 2,147 $ 2,308 (7) $ 4,110 $ 4,389 (6)
Cost of Sales ...................... 790 784 1 1,530 1,442 6
Selling, General
and Administrative .............. 979 938 4 1,893 1,780 6
Research and Development a/ ........ 451 369 22 824 691 19
Other, Net ......................... 43 (4) N/M 78 8 N/M
Special Charges b/ ................. 42 20 N/M 112 20 N/M
Equity (Income)/Loss from
Cholesterol Joint Venture ....... (77) (26) N/M (154) 4 N/M
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(Loss)/Income Before Income Taxes .. (81) 227 N/M (173) 444 N/M
Income Tax Benefit/(Expense) ....... 16 (45) N/M 35 (89) N/M
------- ------- ------- -------
Net (Loss)/Income .................. $ (65) $ 182 N/M $ (138) $ 355 N/M
======= ======= ======= =======
Diluted (Loss)/Earnings per
Common Share .................... $ (0.04) $ 0.12 N/M $ (0.09) $ 0.24 N/M
======= ======= ======= =======
Effective Tax Rate ................. 20.0% 20.0% 20.0% 20.0%
Average Common Shares
Outstanding - Diluted ........... 1,472 1,471 1,471 1,471
Actual Number of Common Shares
Outstanding at June 30 .......... 1,472 1,469 1,472 1,469
N/M - Not a meaningful percentage
a/ Research and development in the second quarter 2004 and first six months of
2004 includes an $80 million upfront payment in conjunction with the licensing
from Toyama Chemical Company LTD. of garenoxacin, a quinolone antibiotic in
development.
b/ Special Charges for the second quarter ended June 30, 2004 included $42
million of employee termination costs. Special charges for the six months ended
June 30, 2004 included $86 million of employee termination costs and $26 million
of asset impairment charges primarily related to the company's anticipated exit
from a small European research-and-development facility. Special Charges for
2003 included $20 million of asset impairment charges related to manufacturing
facility assets.
The Company noted that it incurs substantial costs, such as selling, general and
administrative costs, that are not reflected in the "Equity income from
cholesterol joint venture" and are borne by the overall cost structure of
Schering-Plough.
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SCHERING-PLOUGH CORPORATION
Report for the second quarter ended June 30 (unaudited):
Net Sales by Major Product:
(Dollars in Millions)
Second Quarter Six Months
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2004 2003 % 2004 2003 %
---- ---- - ---- ---- -
GLOBAL PHARMACEUTICALS $1,644 $1,871 (12) $3,125 $3,517 (11)
Clarinex / Aerius 226 219 3 356 392 (9)
Remicade 182 126 44 347 240 45
Nasonex 156 175 (11) 296 254 17
PEG-Intron 144 247 (42) 293 469 (38)
Temodar 102 87 17 188 146 28
Intron A 89 125 (29) 158 199 (21)
Rebetol 88 196 (55) 187 415 (55)
Claritin Rx * 82 90 (9) 173 179 (3)
Integrilin 78 92 (15) 151 181 (16)
Subutex 47 36 31 91 66 37
Elocon 46 41 13 84 80 6
Caelyx 35 26 34 70 49 43
CONSUMER HEALTH CARE 317 266 19 629 559 12
OTC 150 135 11 306 291 5
OTC Claritin 117 97 22 234 225 4
FOOT CARE 89 83 7 166 145 14
SUN CARE 78 48 60 157 123 28
ANIMAL HEALTH 186 171 9 356 313 14
CONSOLIDATED NET SALES $2,147 $2,308 (7) $4,110 $4,389 (6)
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* Includes international sales of Claritin Rx only. Canadian sales of Claritin
are now reported in the OTC Claritin line within Consumer Health Care. The prior
period has been reclassified accordingly.
Global cholesterol franchise sales, which include Zetia and Vytorin, totaled
$247 million in the 2004 second quarter and $436 million for the six month
period.
NOTE: Certain prior period amounts have been reclassified to conform to the
current year presentation.
Additional information about U.S. and international sales for specific
products is available by calling the company or visiting the investor
relations Web site at http://ir.schering-plough.com.
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