Exhibit 99.1
[SCHERING-PLOUGH LETTERHEAD]
News Release
FOR RELEASE: IMMEDIATELY Media Contact: Steve Galpin, Jr.
(908) 298-7415
Investor Contacts: Alex Kelly
Janet M. Barth
(908) 298-7436
SCHERING-PLOUGH REPORTS FINANCIAL RESULTS FOR 2004 THIRD QUARTER
KENILWORTH, N.J., Oct. 21, 2004 - Schering-Plough Corporation (NYSE: SGP) today
reported financial results for the 2004 third quarter.
"We are on track with our Action Agenda and working through what we
knew would be a difficult year in 2004," said Fred Hassan, Schering-Plough
chairman and CEO. "While significant challenges remain, the recent quarter
brought several important achievements, which we believe should set the stage
for our anticipated turnaround beginning in 2005.
"Foremost among these was the on-time U.S. approval and rapid launch of
the cholesterol-lowering product VYTORIN," said Hassan, "offering patients a
powerful new treatment option for high cholesterol. We are also pleased with the
continued competitive strength of ZETIA for high cholesterol and stabilizing
prescription market share trends for certain other key products. In addition,
our strategic agreement with Bayer will give us a strong partner to launch ZETIA
when approved in Japan and expand our product portfolio and selling capabilities
in the U.S. market."
He said the company also made further progress in fulfilling its
consent decree obligations and in resolving legal issues from the past, reaching
a resolution of the investigation by the Philadelphia U.S. Attorney's Office and
the U.S. Department of Justice. "Finally," he added, "we strengthened our
balance sheet with the issuance of convertible preferred stock, giving us
greater financial flexibility."
VYTORIN (ezetimibe/simvastatin) is a new cholesterol-lowering therapy
developed and marketed in partnership with Merck & Co., Inc. Approved for U.S.
marketing on July 23, VYTORIN is a once-daily tablet containing ZETIA
(ezetimibe), a cholesterol-absorption inhibitor discovered by Schering-Plough,
and Merck's Zocor (simvastatin) statin product. VYTORIN is the first single
tablet to provide powerful LDL cholesterol reduction through dual inhibition of
the two sources of cholesterol by inhibiting the production of cholesterol in
the liver and blocking the absorption of cholesterol in the
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intestine, including cholesterol from food. VYTORIN has been shown to lower LDL
cholesterol by 52 percent at the recommended starting dose (10/20 mg) and 60
percent at the maximum dose (10/80 mg). In head-to-head trials, VYTORIN provided
superior reductions in LDL cholesterol versus current market leaders
atorvastatin (Pfizer's Lipitor(R)) and simvastatin (Zocor) across the dosing
range. With new health recommendations calling for even lower LDL cholesterol
goals, VYTORIN is well positioned to compete in the cholesterol-lowering market
and get more patients to their goals at their initial starting dosages.
"Since the recent U.S. launch of VYTORIN, we are also getting a good
early response in our efforts to gain acceptance of VYTORIN on managed care
formularies," added Hassan. "We are gratified that - after only two months into
the product's launch - managed care appears to be truly recognizing the value
proposition of VYTORIN. We estimate that VYTORIN has been granted Tier 2 status
or better on formularies for more than 50 percent of all U.S. covered lives,
giving more than 100 million people good access to this important medical
advance."
Hassan said Schering-Plough is also working to upgrade the company's
global infrastructure while relentlessly pursuing greater efficiencies and cost
reductions.
"There is still much work ahead for Schering-Plough," said Hassan. "But
we are making steady progress in the Stabilization and Repair phases of our
Action Agenda and continue to look forward to the anticipated turnaround
beginning in 2005. We remain committed to a strategy that holds business
integrity, quality and compliance at its core."
THIRD QUARTER 2004 RESULTS
Schering-Plough reported net income available for common shareholders of $14
million in the 2004 third quarter or 1 cent in diluted earnings per common share
compared with a loss in the 2003 period of $265 million or 18 cents per share.
Net income available for common shareholders and earnings per share in the 2004
third quarter reflected the accrual of $12 million for a dividend to be paid on
Dec. 15, 2004, to holders of the recently issued Mandatory Convertible Preferred
Stock. The loss in the 2003 period reflected the addition of $350 million to the
company's litigation reserves. Special charges in the 2004 third quarter totaled
$26 million or 1 cent per diluted share (as measured using the company's
effective tax rate). The special charges related primarily to
employee-termination costs stemming from reductions in the company's global
workforce.
Other factors affecting results for the 2004 third quarter included:
the impact on sales of REBETOL for hepatitis C from generic and branded
competition; the absence of LOSEC revenues; investments to expand pharmaceutical
field forces; and higher manufacturing and related costs in
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connection with Food and Drug Administration (FDA) consent decree, compliance
and quality-systems obligations.
Third quarter 2004 net sales of $2.0 billion were 1 percent lower than
the 2003 period and included a favorable foreign exchange impact of 3 percent.
Third quarter sales of Prescription Pharmaceuticals totaled $1.6 billion, down 2
percent, with a favorable foreign exchange impact of 3 percent. The company
noted that net sales do not include sales of the cholesterol joint venture with
Merck, which are recorded using the equity method, as described below. Consumer
Health Care sales declined 1 percent to $239 million and Animal Health sales
grew 8 percent to $183 million, including a favorable foreign exchange impact of
4 percent. Consolidated U.S. net sales were $800 million, down 4 percent, and
net sales outside the United States were $1.2 billion, up 1 percent, including a
5 percent favorable impact from foreign exchange. Outside the United States,
sales for the third quarter of 2004 reflected unfavorable comparisons due to the
absence of LOSEC revenues in Europe. LOSEC revenues in the 2003 third quarter
were $52 million. This is the final quarter of unfavorable LOSEC comparisons as
the company's agreement with AstraZeneca ended in the 2003 third quarter.
Global cholesterol franchise sales, which include VYTORIN and ZETIA,
totaled $344 million in the 2004 third quarter compared with sales of $137
million in the comparable 2003 period. VYTORIN (also marketed as INEGY) has now
been approved in 11 countries (including the United States) and ZETIA in 71
countries. In the United States, more than 12 million prescriptions have been
written for ZETIA 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." "Equity income from cholesterol
joint venture" for Schering-Plough totaled $95 million in the 2004 third
quarter. The company noted that it incurs substantial costs, such as selling,
general and administrative costs, that are not reflected in "Equity income from
cholesterol joint venture" and are borne by the overall cost structure of
Schering-Plough.
Among prescription products recording higher sales in the 2004 third
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 third quarter rose 33
percent to $188 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 35 percent to $121
million; and CAELYX, for the treatment of ovarian cancer, metastatic breast
cancer and Kaposi's sarcoma, up 32 percent to $39 million.
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Sales of the company's hepatitis C products in the 2004 third quarter
declined versus the year-ago period due to ongoing competition in a contracting
market and increased U.S. generic competition for REBETOL. Third quarter global
sales of PEG-INTRON were down 23 percent to $132 million; sales of REBETOL were
down 58 percent to $52 million. The company's new PEG-INTRON REDIPEN
precision-dosing pen for hepatitis C patients has gained broad acceptance by
physicians and patients since its February launch in the U.S. market, with the
result that the majority of U.S. PEG-INTRON prescriptions are now being written
for the REDIPEN.
In the company's allergy franchise, global CLARINEX sales in the third
quarter of 2004 were $175 million, up 3 percent. Sales of CLARINEX outside the
United States climbed 39 percent to $57 million in the third quarter due to
market share gains and continued conversion from prescription CLARITIN. U.S.
CLARINEX sales declined 8 percent to $118 million due to the continued
contraction in the 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 a decline in market share.
Global NASONEX sales rose 34 percent to $153 million, with U.S. sales climbing
40 percent to $104 million primarily due to favorable comparisons of trade
inventories. In international markets, NASONEX sales were up 23 percent to $48
million due to market share gains and market growth.
In Consumer Health Care, sales of OTC CLARITIN were roughly flat at
$110 million reflecting increased private label competition. Sun care sales
declined due to lower sales of sunless tanning products. Sales of foot care
products rose 9 percent to $86 million, benefiting from higher sales of DR.
SCHOLL'S FREEZE AWAY wart remover product.
The company's gross margin was 64.1 percent for the 2004 third quarter
versus 67.4 percent in the 2003 period. The change in the gross margin 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, and the absence of European LOSEC revenues. Schering-Plough said
its 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 2 percent to $892
million in the third quarter of 2004, primarily reflecting the field force
expansion and the impact of foreign exchange, offset by lower promotional
spending.
Research and development spending for the third quarter totaled $378
million, down 1 percent, primarily due to the timing of spending on research
programs.
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The "Other, net" line reflects higher net interest expense from
increased borrowings stemming from the long-term debt issued in the 2003 fourth
quarter, offset by higher interest income related to higher cash balances
resulting from the August issuance of $1.4 billion in Mandatory Convertible
Preferred Stock.
As of Sept. 30, 2004, the estimated annual effective tax rate was
approximately 20 percent.
As previously stated, the company reiterated that 2004 earnings are
expected to be below those of 2003 when special charges are excluded.
RECENT DEVELOPMENTS
The company also offered the following summary of recent significant
developments, including:
o Launched the dual-inhibition cholesterol medicine VYTORIN in the U.S.
market following its U.S. approval on July 23.
o Entered into a strategic agreement with Bayer (announced Sept. 13;
effective Oct. 1), giving Schering-Plough exclusive rights in the
United States and Puerto Rico to market, sell and distribute Bayer's
AVELOX (moxifloxacin HCl) and CIPRO (ciprofloxacin HCl) antibiotics and
to undertake Bayer's U.S. commercialization activities for the erectile
dysfunction medicine LEVITRA (vardenafil HCl) under Bayer's
co-promotion agreement with GlaxoSmithKline PLC. In the Japanese
market, Bayer will co-market Schering-Plough's cholesterol absorption
inhibitor ZETIA when approved.
o Issued 28.75 million Mandatory Convertible Preferred Shares with a 6
percent dividend, yielding proceeds of $1.4 billion, on Aug. 10 through
an underwritten registered public offering. The securities will convert
mandatorily into shares of Schering-Plough common stock on Sept. 14,
2007, unless otherwise converted.
o Reached an agreement (announced July 30) with the U.S. Attorney's
Office for the Eastern District of Pennsylvania and the U.S. Department
of Justice to settle a previously disclosed investigation that began in
1999 of the company's managed care marketing programs.
o Completed the European Mutual Recognition Process (MRP) for INEGY
(marketed as VYTORIN in the United States) on Oct. 1.
o Gained European Commission approval (announced Oct. 14) of REMICADE in
the European Union, in combination with methotrexate, for the treatment
of active and progressive psoriatic arthritis in patients who have
responded inadequately to disease modifying anti-rheumatic drugs.
o Gained additional U.S. marketing approvals for products in the
respiratory franchise, including for a new scent-free formulation of
NASONEX (announced Aug. 26) for seasonal and perennial
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allergic rhinitis, and for CLARINEX Syrup (announced Sept. 1) for
seasonal allergic rhinitis in children 2 years and older and perennial
allergic rhinitis and chronic idiopathic urticaria, or hives of unknown
cause, in children as young as 6 months.
o Exercised its option with ViroPharma Incorporated (announced Aug. 23)
to license pleconaril, under development for the treatment of the
common cold in the United States and Canada.
THIRD QUARTER 2004 CONFERENCE CALL AND WEBCAST
Schering-Plough will conduct a conference call today at 8 a.m. (ET) to review
the third quarter results. To listen live to the call, dial 1-706-634-5003. A
replay of the call will be available starting at approximately 11 a.m. on Oct.
21 through 5 p.m. on Oct. 25. To listen to the replay, dial 1-706-645-9291 and
enter the conference ID # 9501266.
A live audio webcast of the conference call also will be available 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 Oct. 21 through 5 p.m. on Oct. 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 that may impact forward-looking statements, see the company's past
and future Securities and Exchange Commission filings, 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
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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. The company is based in Kenilworth, N.J., and its Web site is
www.schering-plough.com.
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SCHERING-PLOUGH CORPORATION
Report for the period ended September 30 (unaudited):
(Amounts in millions, except per share figures)
Third Quarter Nine Months
----------------------------- --------------------------------
2004 2003 % 2004 2003 %
---- ---- - ---- ---- -
Net Sales ................................ $1,978 $1,998 (1) $6,088 $6,386 (5)
Cost of Sales ............................ 711 652 9 2,241 2,094 7
Selling, General
and Administrative .................. 892 873 2 2,785 2,653 5
Research and Development a/ .............. 378 382 (1) 1,201 1,074 12
Other, Net ............................... 34 41 (16) 112 49 N/M
Special Charges b/ ....................... 26 350 (93) 138 370 (63)
Equity (Income) from
Cholesterol Joint Venture ........... (95) (24) N/M (249) (21) N/M
------ ------ ------ -----
Income/(Loss) Before Income Taxes ........ 32 (276) N/M (140) 167 N/M
Income Tax (Expense)/Benefit ............. (6) 11 N/M 28 (77) N/M
------ ------ ------ -----
Net Income/(Loss) ........................ $ 26 $ (265) N/M $ (112) $ 90 N/M
====== ====== ====== ======
Dividends on Preferred Shares ............ 12 0 N/M 12 0 N/M
------ ------ ------ -----
Net Income/(Loss) Available for
Common Shareholders .................. $ 14 $ (265) N/M $ (124) $ 90 N/M
====== ====== ====== ======
Diluted Earnings/(Loss) per
Common Share .......................... $ 0.01 $(0.18) N/M $(0.08) $ 0.06 N/M
====== ====== ====== ======
Effective Tax Rate ....................... 20.0% c/ 20.0% c/
Average Common Shares
Outstanding - Diluted ................. 1,475 1,469 1,472 1,470
Actual Number of Common Shares
Outstanding at September 30 ........... 1,472 1,469 1,472 1,469
- ----------
N/M - Not a meaningful percentage
a/ Research and development in the first nine 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 third quarter ended September 30, 2004 consisted
primarily of employee termination costs. Special charges for the nine months
ended September 30, 2004 included $111 million of employee termination costs and
$27 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 and a $350 million non-tax deductible
provision to increase litigation reserves.
c/ In the 2003 third quarter, the Company reduced its estimate of the 2003
annual effective tax rate to 15% from 20% on income, excluding the $350 million
non-tax deductible provision to increase litigation reserves.
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 period ended September 30 (unaudited):
Net Sales by Major Product:
(Dollars in Millions) Third Quarter Nine Months
----------------------------- --------------------------------
2004 2003 % 2004 2003 %
---- ---- - ---- ---- -
PRESCRIPTION
PHARMACEUTICALS .......................... $1,556 $1,585 (2) $4,681 $5,101 (8)
Remicade .................... 188 142 33 535 382 40
Clarinex / Aerius ........... 175 169 3 530 561 (6)
Nasonex ..................... 153 114 34 449 368 22
PEG-Intron .................. 132 172 (23) 425 641 (34)
Temodar ..................... 121 90 35 309 237 31
Integrilin .................. 94 79 18 245 260 (6)
Intron A .................... 81 103 (21) 239 302 (21)
Claritin Rx * ............... 67 68 (1) 240 247 (3)
Rebetol ..................... 52 125 (58) 239 540 (56)
Subutex ..................... 45 37 22 136 103 32
Elocon ...................... 42 41 2 127 121 5
Caelyx ...................... 39 30 32 109 78 39
CONSUMER HEALTH CARE ..................... 239 243 (1) 868 802 8
OTC ...................................... 150 149 1 456 441 3
OTC Claritin ................ 110 111 (1) 344 336 2
FOOT CARE ................................ 86 80 9 252 224 12
SUN CARE ................................. 3 14 (79) 160 137 17
ANIMAL HEALTH ............................ 183 170 8 539 483 12
CONSOLIDATED NET SALES ................... $1,978 $1,998 (1) $6,088 $6,386 (5)
====== ====== ====== ======
N/M - not a meaningful percentage
* 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
$344 million in the 2004 third quarter and $780 million for the nine 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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