EXHIBIT 99.1
DECEMBER 2, 2004, INVESTOR FREQUENTLY ASKED QUESTIONS AND ANSWERS
FROM TIME TO TIME, INVESTOR RELATIONS WILL PROVIDE FAQS ON VARIOUS
TOPICS OF INTEREST TO INVESTORS. THE FOLLOWING IS A COMPILATION OF
FREQUENTLY ASKED QUESTIONS AND ANSWERS.
Q WHAT IS THE OUTLOOK FOR THE GROSS MARGIN? WHAT IS THE EXPECTED IMPACT
OF THE BAYER AGREEMENT ON GROSS MARGIN?
A The company anticipates that the gross margin will continue to be
impacted by the company's product sales mix, production volumes and
increased spending associated with our compliance efforts.
Looking forward, the Bayer transaction will have an unfavorable impact
on our gross margin, as we will pay a substantial royalty of greater
than 50 percent to Bayer on the U.S. sales of AVELOX, CIPRO and ADALAT.
Q WHAT IS THE IMPACT OF THE BAYER AGREEMENT ON SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES?
A Looking forward, we plan to integrate about 800-900 Bayer sales
representatives into Schering-Plough in the 2004 fourth quarter. As a
result, we expect our sales force costs to increase accordingly.
Q WHAT IS YOUR REACTION TO THE APPROVAL OF THE HOMELAND INVESTMENT ACT?
A The President signed the American Jobs Creation Act into law on October
22. This law, which included the important Homeland Investment Act,
promises to benefit the U.S. economy and foster job creation. For
Schering-Plough, the company is pleased that it may enable us to access
cash held overseas at a lower tax rate and strengthen our domestic
operations here in the United States.
Q ONCE YOU HAVE REPATRIATED THE OVERSEAS FUNDS, WHAT DO YOU INTEND TO DO
WITH THE MONEY?
A Before any dividends from foreign subsidiaries can be provided to the
domestic parent company, the legislation requires that companies
prepare a domestic reinvestment plan. Until the law can be fully
analyzed and a proper reinvestment plan has been prepared and approved
by senior management, it would be premature to speculate on how the
repatriated funds might be spent.
In addition, there is little official guidance on the specific
allowable uses of the repatriated earnings. We are currently assessing
the legislation's potential application for Schering-Plough.
Q WHAT WERE SALES OF ZETIA AND VYTORIN IN THE 2004 THIRD QUARTER?
A Global cholesterol franchise sales, which include ZETIA and VYTORIN,
totaled $344 million in the 2004 third quarter compared with sales of
$137 million in 2003.
Global sales of ZETIA in the 2004 third quarter were $294 million,
including $256 million in U.S. sales. This compares to 2003 third
quarter global ZETIA sales of $137 million.
Global sales of VYTORIN in the 2004 third quarter were $50 million, of
which $42 million came from the U.S. VYTORIN was launched in the U.S.
during the 2004 third quarter.
Q DOES SCHERING-PLOUGH HAVE INVENTORY MANAGEMENT AGREEMENTS WITH ITS
WHOLESALERS?
A Schering-Plough recently put in place inventory management programs
with certain key customers. Our goal is to maintain a consistent supply
of products to the wholesaler, retailer, and patient to fill true
demand. We will continue to closely monitor our supply chain and trade
inventory levels to ensure this goal is met.
Q WHAT WILL BE THE IMPACT GOING FORWARD OF THE MANDATORY CONVERTIBLE
PREFERRED STOCK DIVIDEND?
A On Aug. 10, 2004, Schering-Plough issued 28.75 million shares of 6
percent mandatory convertible preferred stock with a face value of $1.4
billion. The mandatory conversion date of the shares is Sept. 14, 2007.
The preferred stock accrues dividends at an annual rate of 6 percent on
shares outstanding.
As a result, the company will make an after-tax payment of
approximately $86 million ($0.06 per share) each year for the preferred
stock dividend, assuming no conversions take place, until the mandatory
conversion in September 2007. This dividend payment will accrue on a
quarterly basis and thus, lower net income available to common
shareholders.
Q WHAT IS THE STATUS OF YOUR CONSENT DECREE OBLIGATIONS? HAVE YOU
COMPLETED THE BULK OF THE WORK REQUIRED?
A As of September 30, 2004 we have completed 142 of 212 significant steps
and 20 of 33 validation actions - and so far our teams have met this
unprecedented challenge without incurring any payments for missed
deadlines. We plan to continue to work diligently toward completing
these deadlines on time; however, we will not sacrifice quality work in
order to meet a deadline.
While we have completed a large portion of our work, it is important to
note that the fourth quarter is still a steep part of the compliance
curve.
In addition, the Consent Decree contains a sunset provision that
permits the Company to petition the Court to dissolve the Decree if,
during any five year period following the entry of the Decree (May 20,
2002), FDA has not notified the Company that there has been a
significant violation of FDA law, regulations, or the Decree. If these
conditions are satisfied, the Decree states that FDA will not oppose
the Company's petition. The earliest the Company would be in a position
to submit such a petition would be May, 2007 (five years after the
entry of the Decree).
Note: The total number of significant steps and validation actions has
been revised from year-end 2003 to account for certain product
discontinuations and/or outsourcing to third-party manufacturers.
Q HAVE THERE BEEN ANY CHANGES TO YOUR PRODUCT PIPELINE?
A Schering-Plough from time to time updates public information about its
products in development, also known as its "Product Pipeline." The
information, updated as of November 2004, is available on the
Schering-Plough Web site at www.schering-plough.com under "investor
relations/investor publications".
Schering-Plough undertakes no obligation to update the information in
the future, and readers should note the date of information when
referring to the product pipeline or other historical information
available on the Web site.
The following is a summary of the recent changes to the Schering-Plough
Product Pipeline:
PHASE II
New to this phase is the PDE 5 Inhibitor as a treatment for erectile
dysfunction.
PHASE III
REMICADE
Two new indications have been added to this phase: juvenile idiopathic
arthritis and pediatric Crohn's disease.
NDA/HRD FILED
U.S. and international regulatory submissions have been accepted as
filed for TEMODAR as a treatment of gliomas, a form of brain cancer.
The U.S. FDA has granted a priority review.
JNDA FILED
A new JNDA Filed section has been added to the Product Pipeline to
track company regulatory filings of key products in Japan.
As previously disclosed, ZETIA for monotherapy treatment of high
cholesterol was filed in Japan in the 2003 fourth quarter.
DISCLOSURE NOTICE: This Investor FAQ contains "forward-looking
statements" within the meaning of the Securities Litigation Reform Act
of 1995, including the outlook for our gross margin and the potential
impacts of implementation of the strategic agreement with Bayer.
Forward-looking statements relate to expectations or forecasts of
future events and not to historical information. Schering-Plough does
not assume the obligation to update any forward-looking statement.
There are no guarantees about what our gross margin will be in the
future, the impacts of the strategic agreement or the performance of
Schering-Plough stock or Schering-Plough's business. Actual results may
vary materially from forward-looking statements made here or in other
Schering-Plough written or spoken communications due to many factors
and uncertainties, which include the market acceptance of ZETIA in
Japan, trade buying patterns for Schering-Plough products and Bayer
products covered by the strategic agreement (together, "products"), the
introduction and performance of competitive products, legislation that
may impact the pricing/ availability of the products and other items
impacting Schering-Plough, the pharmaceutical industry, and business
generally, all as discussed in Schering-Plough's Securities and
Exchange Commission filings, including the 10-Q filed October 28, 2004.