Schering-Plough Reports Financial Results for 2008 Fourth Quarter, Full Year
KENILWORTH, N.J., February 03, 2009 /PRNewswire-FirstCall/ -- Schering-Plough Corporation today reported financial results for the 2008 fourth quarter and full year.
"Schering-Plough delivered a very strong performance in 2008 - in the face of intensifying pressures on our industry," said Fred Hassan, chairman and CEO. "We have delivered these results by executing on our core strategies while responding quickly and decisively to the fast-changing environment, including taking effective actions to reduce costs and improve productivity.
"Despite the challenges facing our industry today," continued Hassan, "we remain confident about one thing: that innovator companies - those that can discover and deliver valuable new medicines - should continue to do well. We have shown that we are one of those companies."
For the 2008 fourth quarter, Schering-Plough reported net income available to common shareholders of $442 million or 27 cents per common share on a GAAP basis. Earnings per common share for the 2008 fourth quarter would have been 39 cents on net income of $633 million on a reconciled basis, which excludes purchase accounting adjustments, special and acquisition-related items, and $22 million of income from the termination of a respiratory joint venture with Merck & Co., Inc. (Merck). For the 2007 fourth quarter, Schering-Plough reported a net loss available to common shareholders of $3.4 billion or $2.08 per common share on a GAAP basis and earnings of 27 cents per common share on a reconciled basis.
GAAP net sales for the 2008 fourth quarter totaled $4.3 billion, up 17 percent as compared to the fourth quarter of 2007, reflecting an unfavorable impact from foreign exchange of 6 percent. Sales for the quarter benefited from the inclusion of net sales of products from Organon BioSciences N.V. (OBS), which was acquired on Nov. 19, 2007. Net sales of the global cholesterol joint venture, which include VYTORIN and ZETIA, totaled $1.1 billion in the 2008 fourth quarter and were down 26 percent, primarily due to lower sales in the U.S. Schering-Plough does not record sales of its cholesterol joint venture with Merck as the venture is accounted for under the equity method. Including an adjustment of an assumed 50 percent of the global cholesterol joint venture net sales, Schering-Plough's adjusted net sales for the 2008 fourth quarter would have been $4.9 billion.
Said Hassan on the company's research pipeline: "We are rich in potential first-in-class and best-in-class compounds - and excited that the strength of our innovation is coming through. With 12 new entities in Phase III or pre-registration, we believe ours is an industry-leading late-stage pipeline."
In addition, many of Schering-Plough's key prescription products are protected by long periods of expected exclusivity, with most protected well into the next decade. "At a time when many others in the industry are facing pipeline droughts and patent cliffs, we believe we're in the sweet spot on product flow and expected exclusivity. This gives us a special edge."
The company has made major progress in building strength and diversity - across its businesses, geographic presence and product portfolio. Important assets include its leading Animal Health business and innovative Consumer Health Care unit. A key action was the acquisition of Organon BioSciences in November 2007 and its successful integration. The OBS acquisition added new treatment categories (women's health and central nervous system), expanded the product pipeline with promising late-stage compounds, and made Schering-Plough the world's largest animal health company. In the first half of 2008, the company had already achieved its full-year OBS accretion target.
Several other important achievements were made over the past five full years (2004-08) since the current management team joined Schering-Plough:
Thomas P. Koestler, Ph.D., executive vice president and president of Schering-Plough Research Institute, said, "Our scientists have made R&D innovation a hallmark of our pipeline. The productivity of our labs is evidenced by our rich late-stage pipeline, by the six projects designated 'fast track' by the FDA, and by our 75 new molecular entities in all phases of development. We will continue to pursue novel approaches so that patients and physicians can gain access to new therapies to treat and modify the pathways of serious diseases."
Schering-Plough at a November 2008 R&D Update meeting highlighted its rich and innovative pipeline, with 46 new entities in clinical trials or under regulatory review, including:
Responding decisively to business conditions, the company in April 2008 launched its Productivity Transformation Program (PTP), which is expected to realize savings of $1.5 billion by the end of 2012, with $1.25 billion in savings targeted to be accomplished by 2010. The $1.5 billion target includes the previously announced integration synergy targets from the OBS acquisition. The company is making steady progress toward achieving these savings targets and increasing operational efficiencies.
For the 2008 fourth quarter, Schering-Plough reported net income available to common shareholders of $442 million or 27 cents per common share on a GAAP basis. Earnings per common share for the 2008 fourth quarter would have been 39 cents on net income of $633 million on a reconciled basis, which excludes purchase accounting adjustments, special and acquisition-related items and $22 million of income from the termination of a respiratory joint venture with Merck. For the 2007 fourth quarter, Schering-Plough reported a net loss available to common shareholders of $3.4 billion or $2.08 per common share on a GAAP basis and earnings of 27 cents per common share on a reconciled basis, which excludes acquisition-related items and an upfront R&D payment.
GAAP net sales for the 2008 fourth quarter increased 17 percent to $4.3 billion, including $1.3 billion in sales of products from the OBS acquisition and an unfavorable impact from foreign exchange of 6 percent.
Global cholesterol joint venture net sales, which include VYTORIN and ZETIA, totaled $1.1 billion, a decrease of 26 percent when compared to the fourth quarter of 2007. Schering-Plough does not record sales of its cholesterol joint venture with Merck as the venture is accounted for under the equity method. Including an adjustment of an assumed 50 percent of the global cholesterol joint venture net sales, Schering-Plough's adjusted net sales for the 2008 fourth quarter would have been $4.9 billion.
Overall, Schering-Plough shares in approximately 50 percent of the profits of the joint venture with Merck, although there are different profit-sharing arrangements for the cholesterol products in countries around the world. Schering-Plough records its share of the income from operations in "Equity income," which totaled $426 million in the 2008 fourth quarter, as compared to $566 million in the fourth quarter of 2007. Included in fourth quarter 2008 GAAP equity income is $22 million of income related to the termination of the respiratory joint venture. Schering-Plough noted that it incurs substantial costs such as selling, general and administrative costs that are not reflected in "Equity income" and are borne by its overall cost structure. There is a separate co-marketing agreement with Bayer for ZETIA in Japan, where the product was launched in June 2007.
Sales of Prescription Pharmaceuticals for the 2008 fourth quarter increased 17 percent to total $3.5 billion, including an unfavorable impact from foreign exchange of 6 percent. Included in the fourth quarter of 2008 are $823 million of net sales of products related to the OBS human health business compared to $409 million in the prior year period. Schering-Plough acquired OBS on Nov. 19, 2007.
Sales of REMICADE increased 8 percent to $491 million in the fourth quarter of 2008 due to continued market growth and expanded penetration in certain indications partially offset by an unfavorable impact from foreign exchange. REMICADE is a treatment for inflammatory diseases that Schering-Plough markets in countries outside the U.S. (except in Japan and certain other Asian markets) for rheumatoid arthritis, early rheumatoid arthritis, ankylosing spondylitis, psoriatic arthritis, plaque psoriasis, Crohn's disease, pediatric Crohn's disease and ulcerative colitis.
Sales of TEMODAR, a treatment for certain types of brain tumors, increased 4 percent to $242 million, with higher sales in most markets partially offset by the unfavorable impact of foreign exchange.
Global sales of NASONEX, an inhaled nasal corticosteroid for allergies, rose 3 percent to $280 million versus the 2007 period, due to increased sales in the U.S. and international markets.
Sales of PEGINTRON for hepatitis C decreased 6 percent to $225 million in the 2008 fourth quarter, primarily due to lower sales in the U.S.
In women's health care, sales for FOLLISTIM/PUREGON, a fertility treatment, for the fourth quarter of 2008 were $127 million. Sales of NUVARING, a contraceptive product, in the 2008 fourth quarter grew to $110 million. These women's health products were obtained as part of the OBS acquisition.
Global sales of CLARINEX, a nonsedating antihistamine, in the fourth quarter of 2008 were $160 million, a decrease of 8 percent as compared to the fourth quarter of 2007, primarily due to lower sales in the U.S.
International sales of prescription CLARITIN were $99 million in the fourth quarter of 2008, a 6 percent increase compared to sales of $93 million in the fourth quarter of 2007 due primarily to higher sales in Japan.
Animal Health sales totaled $674 million in the 2008 fourth quarter, a 33 percent increase (including an unfavorable impact from foreign exchange of 9 percent) as compared to $507 million in the fourth quarter of 2007. Animal Health sales included sales related to products from the acquired OBS animal health business of $436 million in the fourth quarter of 2008 and $217 million in the fourth quarter of 2007. Animal Health sales in the 2008 fourth quarter were unfavorably impacted by foreign exchange, the divestment of certain products related to the acquisition of OBS and by factors resulting from current credit conditions, including inventory reductions initiated by customers.
Consumer Health Care sales were $219 million in the 2008 fourth quarter, down 14 percent versus the 2007 period. The decrease was mainly due to lower sales of OTC CLARITIN, which were unfavorably impacted by retail inventory reductions, private-label competition and the timing of shipments. Partially offsetting the sales decline were higher sales of OTC MIRALAX, launched in February 2007, which increased to $30 million.
Schering-Plough does not record sales of its cholesterol joint venture and incurs substantial costs such as selling, general and administrative costs that are not reflected in "Equity income" and are borne by the overall cost structure of Schering-Plough. As a result, Schering-Plough's gross margin and ratios of selling, general and administrative (SG&A) expenses and R&D expenses as a percentage of sales do not reflect the benefit of the impact of the cholesterol joint venture's operating results.
Schering-Plough's gross margin on a GAAP basis was unfavorably affected by purchase accounting adjustments and totaled 64.9 percent for the 2008 fourth quarter as compared to 57.9 percent in the 2007 period. Excluding purchase accounting adjustments, the gross margin percentage increased to 68.9 percent for the fourth quarter of 2008 as compared to 66.7 percent for the fourth quarter of 2007, primarily due to a favorable impact from foreign exchange.
SG&A expenses were $1.6 billion in the fourth quarter of 2008, essentially flat as compared to the fourth quarter of 2007.
Research and development spending for the 2008 fourth quarter was $850 million consistent with the fourth quarter of 2007. Included in R&D spending in the fourth quarter of 2007 was $21 million related to an upfront payment made for a licensing transaction. R&D expenditures reflect spending for clinical trials and related activities, and investments to build greater depth and capacity to support Schering-Plough's expanding global R&D pipeline.
Schering-Plough's full-year 2008 financial results include results of operations for OBS. For the full-year 2008, Schering-Plough reported net income available to common shareholders of $1.6 billion or $1.01 per common share on a GAAP basis. Earnings per common share on a reconciled basis grew 28 percent to $1.75, excluding purchase accounting adjustments, special and acquisition-related items, a $160 million pre-tax gain from the divestitures of certain animal health products, $105 million of income from the termination of a respiratory joint venture with Merck, and other specified items. For the full-year 2007, Schering-Plough reported a net loss of $1.6 billion or $1.04 per common share on a GAAP basis, which included $3.8 billion of acquired in-process research and development charges related to the purchase accounting of the OBS acquisition. Excluding purchase accounting adjustments, special and acquisition-related items and other specified items, Schering-Plough's full-year 2007 earnings per common share were $1.37.
Schering-Plough reported full-year 2008 GAAP net sales of $18.5 billion, a 46 percent increase, compared to $12.7 billion in 2007, including a favorable impact of 3 percent from foreign exchange. The increase was primarily due to the acquisition of OBS on Nov. 19, 2007. Schering-Plough's adjusted net sales for 2008 totaled $20.8 billion, an increase of $5.6 billion as compared to $15.2 billion on an adjusted basis in 2007. The company noted that for 2009 U.S. sales of VYTORIN and ZETIA are expected to be lower than in 2008 while international sales, excluding the impact of foreign exchange, should continue to grow.
On a GAAP basis, Schering-Plough's gross margin was 60.5 percent in 2008 as compared to 65.3 percent in 2007. Excluding purchase accounting adjustments, the gross margin percentage increased to 68.3 percent in 2008 as compared to 67.9 percent in 2007.
For the 2008 full year, selling, general and administrative expenses were $6.8 billion.
Research and development spending for 2008 totaled $3.5 billion.
Equity income in 2008 totaled $1.9 billion, a decrease of 9 percent compared to 2007.
The company also offered the following summary of recent significant developments that have previously been announced, including:
Schering-Plough will conduct a conference call today at 8 a.m. (EST) to review the 2008 fourth quarter and full-year results. To listen live to the call, dial 1-877-565-9664 or 1-706-634-5003 and enter conference ID #78444197. A replay of the call will be available beginning later on Feb. 3 through 5 p.m. on Feb. 10. To listen to the replay, dial 1-800-642-1687 or 1-706-645-9291 and enter the conference ID #78444197. 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 on Feb. 3 through 5 p.m. on Feb. 24.
DISCLOSURE NOTICE: The information in this press release, the comments of Schering-Plough officers during the earnings teleconference/webcast on Feb. 3, 2009, beginning at 8 a.m. (EST), and other written reports and oral statements made from time to time by the company may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements do not relate strictly to historical or current facts and are based on current expectations or forecasts of future events. You can identify these forward-looking statements by their use of words such as "anticipate," "believe," "could," "estimate," "expect," "forecast," "project," "intend," "plan," "potential," "will," and other similar words and terms. In particular, forward-looking statements include statements relating to the company's plans; its strategies; its progress under the Action Agenda and anticipated timing regarding future performance of the Action Agenda; business prospects; anticipated growth; timing and level of savings achieved from the Productivity Transformation Program, including the ongoing integration of OBS; prospective products or product approvals; trends in performance; anticipated timing of clinical trials and its impact on R&D spending; anticipated exclusivity periods; actions to enhance clinical, R&D, manufacturing and post-marketing systems; and the potential of products and trending in therapeutic markets, including the cholesterol market. Actual results may vary materially from the company's forward-looking statements, and there are no guarantees about the performance of Schering-Plough stock or Schering-Plough's business. Schering-Plough does not assume the obligation to update any forward-looking statement. A number of risks and uncertainties could cause results to differ materially from forward-looking statements, including, among other uncertainties, market viability of the company's (and the cholesterol joint venture's) marketed and pipeline products; market forces; economic factors such as interest rate and exchange rate fluctuations; the outcome of contingencies such as litigation and investigations including litigation and investigations relating to the ENHANCE clinical trial; product availability; patent and other intellectual property protection; current and future branded, generic or over-the-counter competition; the regulatory process (including product approvals, labeling and post-marketing actions); scientific developments relating to marketed products or pipeline projects; and media and societal reaction to such developments. For further details of these and other risks and uncertainties that may impact forward-looking statements, see Schering-Plough's Securities and Exchange Commission filings, including Part II, Item 1A. "Risk Factors" in the third quarter 2008 10-Q, filed Oct. 29, 2008.
Schering-Plough is an innovation-driven, science-centered global health care company. Through its own biopharmaceutical research and collaborations with partners, Schering-Plough creates therapies that help save and improve lives around the world. The company applies its research-and-development platform to human prescription, animal health and consumer health care products. Schering-Plough's vision is to "Earn Trust, Every Day" with the doctors, patients, customers and other stakeholders served by its colleagues around the world. The company is based in Kenilworth, N.J., and its Web site is www.schering-plough.com.
SCHERING-PLOUGH CORPORATION
U.S. GAAP report for the Fourth quarter and Twelve months ended December 31
(unaudited):
(Amounts in millions, except per share figures)
Fourth Quarter Twelve Months
2008 2007 2008 2007
---- ---- ---- ----
Net sales 1/ $4,348 $3,724 $18,502 $12,690
Cost of sales 2/ 1,525 1,566 7,307 4,405
Selling, general and
administrative 1,615 1,634 6,823 5,468
Research and development 3/ 850 855 3,529 2,926
Acquired in-process research
and development 4/ - 3,754 - 3,754
Other expense/(income), net 146 (231) 335 (683)
Special and acquisition-
related charges 5/ 111 52 329 84
Equity income 6/ (426) (566) (1,870) (2,049)
----- ----- ------- -------
Income/(loss) before income
taxes 527 (3,340) 2,049 (1,215)
Income tax expense/(benefit) 47 (14) 254 258
-- ---- --- ---
Net income/(loss) $480 $(3,326) $1,795 $(1,473)
==== ======== ====== ========
Preferred stock dividends 38 38 150 118
-- -- --- ---
Net income/(loss) available
to common shareholders $442 $(3,364) $1,645 $(1,591)
==== ======== ====== =========
Diluted earnings/(loss) per
common share $0.27 $(2.08) $1.01 $(1.04)
===== ======= ===== =======
1,634 1,621 1,635 1,536
The company incurs substantial costs related to the cholesterol joint
venture, such as selling, general and administrative costs, that are not
reflected in the "Equity income" and are borne by the overall cost
structure of Schering-Plough.
1/ Net sales for the three and twelve months ended December 31, 2008,
include sales of Organon BioSciences (OBS) products of $1.3 billion
and $5.4 billion, respectively. Net sales for the three and twelve
months ended December 31, 2007 include sales of OBS products of $626
million subsequent to closing date of the acquisition on November 19,
2007.
2/ Cost of sales for the three and twelve months ended December 31, 2008,
include purchase accounting adjustments of $174 million and $1.4
billion, respectively, related to the acquisition of OBS. Cost of
sales for the three and twelve months ended December 31, 2007,
includes purchase accounting adjustments of $326 million related to
the acquisition of OBS.
3/ Research and development for the three and twelve months ended
December 31, 2007 include $21 million and $197 million, respectively,
related to upfront R&D payments.
4/ Acquired in-process research and development for the twelve months
ended December 31, 2007 represents a charge of $3.8 billion in
connection with the acquisition of OBS.
5/ Special and acquisition-related charges relate to the Productivity
Transformation Program (PTP), which also incorporates the ongoing
integration of OBS. For the three and twelve months ended December 31,
2008, these charges were $111 million ($97 million for severance costs
and $14 million for integration-related costs) and $329 million ($275
million for severance costs and $54 million for integration-related
costs), respectively. Special and acquisition-related charges for the
three and twelve months ended December 31, 2007 were $52 million and
$84 million, respectively.
6/ Equity income for the three and twelve months ended December 31, 2008
include $22 million and $105 million, respectively, of income related
to the termination of a respiratory joint venture with Merck.
SCHERING-PLOUGH CORPORATION
Reconciliation from Reported Net Income Available to Common Shareholders
and Reported Diluted Earnings Per Common Share to As Reconciled Amounts
for Net Income Available to Common Shareholders and Diluted Earnings per
Common Share
(Amounts in Millions, except per share figures)
To supplement its consolidated financial statements presented in
accordance with accounting principles generally accepted in the United
States of America (U.S. GAAP), Schering-Plough is providing the
supplemental financial information below and on the following pages to
reflect "As Reconciled" amounts related to Net income available to common
shareholders and Diluted earnings per common share. "As Reconciled"
amounts exclude the effects of purchase accounting adjustments, special
and acquisition-related items and other specified items.
"As Reconciled" amounts related to Net income/(loss) available to common
shareholders and Diluted earnings/(loss) per common share are non-U.S.
GAAP measures used by management in evaluating the performance of
Schering-Plough's overall business. The effects of purchase accounting
adjustments, special and acquisition-related items and other specified
items have been excluded from Net income/(loss) available to common
shareholders and Diluted earnings/(loss) per common share as management
of Schering-Plough does not consider these items to be indicative of
continuing operating results. Schering-Plough believes that these
"As Reconciled" performance measures contribute to a more complete
understanding by investors of the overall results of the company and
enhances investor understanding of items that impact the comparability of
results between fiscal periods. Net income/(loss) available to common
shareholders and Diluted earnings/(loss) per common share, as reported,
are required to be presented under U.S. GAAP.
Three months ended December 31, 2008
(unaudited)
Special
and
Purchase Acquisition- Other As
As Accounting Related Specified Reconciled
Reported Adjustments Items Items (1)
-------- ----------- ----------- --------- ----------
Net sales $4,348 $- $- $- $4,348
Cost of sales 1,525 (174) - - 1,351
Selling,
general and
administrative 1,615 (1) - - 1,614
Research and
development 850 (2) - - 848
Other expense/
(income), net 146 - - - 146
Special and
acquisition-
related charges 111 - (111) - -
Equity income (426) - - 22 (404)
----- - - -- -----
Income before
income taxes 527 177 111 (22) 793
Income tax
expense/(benefit) 47 (44) (31) - 122
-- ---- ---- - ---
Net income $480 $133 $80 $(22) $671
---- ---- --- ----- ----
Preferred stock
dividends 38 - - - 38
-- - - - --
Net income
available to
common
shareholders $442 $133 $80 $(22) $633
==== ==== === ===== ====
Diluted
earnings per
common share $0.27 $0.39
===== =====
Average shares
outstanding-
diluted 1,634 1,634
(1) "As Reconciled" to exclude purchase accounting adjustments, special
and acquisition-related items and other specified items.
SCHERING-PLOUGH CORPORATION
Reconciliation from Reported Net (Loss)/Income Available to Common
Shareholders and Reported Diluted (Loss)/Earnings Per Common Share to As
Reconciled Amounts for Net (Loss)/Income Available to Common Shareholders
and Diluted (Loss)/Earnings per Common Share
(Amounts in Millions, except per share figures)
Three months ended December 31, 2007
(unaudited)
Special
and
Purchase Acquisition- Other As
As Accounting Related Specified Reconciled
Reported Adjustments Items Items (1)
-------- ----------- ----------- --------- ----------
Net sales $3,724 $- $- $- $3,724
Cost of sales 1,566 (326) - - 1,240
Selling, general
and
administrative 1,634 - - - 1,634
Research and
development 855 - - (21) 834
Acquired
in-process
research and
development 3,754 (3,754) -
Other expense/
(income), net (231) - 255 - 24
Special and
acquisition-
related charges 52 - (52) - -
Equity income (566) - - - (566)
----- - - - -----
(Loss)/income
before income
taxes (3,340) 4,080 (203) 21 558
Income tax
(benefit)/
expense (14) (89) (2) (1) 78
---- ---- --- --- --
Net (loss)/
income $(3,326) $3,991 $(205) $20 $480
-------- ------ ------ --- ----
Preferred stock
dividends 38 - - - 38
-- - - - --
Net (loss)/
income
available to
common
shareholders $(3,364) $3,991 $(205) $20 $442
======== ====== ====== === ====
Diluted (loss)/
earnings per
common share $(2.08) $0.27
======= =====
Average shares
outstanding-
diluted 1,621 1,648
(1) "As Reconciled" to exclude purchase accounting adjustments, special
and acquisition-related items and other specified items.
SCHERING-PLOUGH CORPORATION
Reconciliation from Reported Net Income Available to Common Shareholders
and Reported Diluted Earnings Per Common Share to As Reconciled Amounts
for Net Income Available to Common Shareholders and Diluted Earnings per
Common Share
(Amounts in Millions, except per share figures)
Twelve months ended December 31, 2008
(unaudited)
Special
and
Purchase Acquisition- Other As
As Accounting Related Specified Reconciled
Reported Adjustments Items Items (1)
-------- ----------- ----------- --------- ----------
Net sales $18,502 $- $- $- $18,502
Cost of sales 7,307 (1,437) - - 5,870
Selling, general
and
administrative 6,823 (4) - - 6,819
Research and
development 3,529 (8) - - 3,521
Other expense/
(income), net 335 - - 177 512
Special and
acquisition-
related charges 329 - (329) - -
Equity income (1,870) - - 105 (1,765)
------- - - --- -------
Income before
income taxes 2,049 1,449 329 (282) 3,545
Income tax
expense/(benefit) 254 (236) (56) 16 530
--- ----- ---- -- ---
Net income $1,795 $1,213 $273 $(266) $3,015
------ ------ ---- ------ ------
Preferred stock
dividends 150 - - - 150
--- - - - ---
Net income
available to
common
shareholders $1,645 $1,213 $273 $(266) $2,865
====== ====== ==== ====== ======
Diluted earnings
per common
share $1.01 $1.75
===== =====
Average shares
outstanding-
diluted 1,635 1,635
(1) "As Reconciled" to exclude purchase accounting adjustments, special
and acquisition-related items and other specified items.
SCHERING-PLOUGH CORPORATION
Reconciliation from Reported Net (Loss)/Income Available to Common
Shareholders and Reported Diluted (Loss)/Earnings Per Common Share to As
Reconciled Amounts for Net (Loss)/Income Available to Common Shareholders
and Diluted (Loss)/Earnings per Common Share
(Amounts in Millions, except per share figures)
Twelve months ended December 31, 2007
(unaudited)
Special
and
Purchase Acquisition- Other As
As Accounting Related Specified Reconciled
Reported Adjustments Items Items (1)
Net sales $12,690 $- $- $- $12,690
Cost of sales 4,405 (326) - - 4,079
Selling,
general and
administrative 5,468 - - - 5,468
Research and
development 2,926 - - (197) 2,729
Acquired
in-process
research and
development 3,754 (3,754)
Other expense/
(income), net (683) - 537 - (146)
Special and
acquisition-
related charges 84 - (84) - -
Equity income (2,049) - - - (2,049)
------- - - - -------
(Loss)/income
before income
taxes (1,215) 4,080 (453) 197 2,609
Income tax
expense/
(benefit) 258 (89) (2) (1) 350
--- ---- --- --- ---
Net (Loss)/
income $(1,473) $3,991 $(455) $196 $2,259
-------- ------ ------ ---- ------
Preferred stock
dividends 118 - - - 118
--- - - - ---
Net (loss)/
income
available to
common
shareholders $(1,591) $3,991 $(455) $196 $2,141
======== ====== ====== ==== ======
Diluted (loss)/
earnings per
common share $(1.04) $1.37
======= =====
Average shares
outstanding-
diluted 1,536 1,607
(1) "As Reconciled" to exclude purchase accounting adjustments, special
and acquisition-related items and other specified items.
SCHERING-PLOUGH CORPORATION
Summary of Detailed Schedule
(Amounts in Millions)
"As Reconciled" amounts related to Net income/(loss) available to common
shareholders and Diluted earnings/(loss) per common share reflect the following
adjustments:
Fourth Quarter Twelve Months
(unaudited) (unaudited)
2008 2007 2008 2007
---- ---- ---- ----
Purchase accounting
adjustments:
-------------------
Amortization of
intangibles in
connection with the
acquisition of Organon
BioSciences (a) $120 $65 $527 $65
Depreciation related to
the fair value
adjustment of fixed
assets related to the
acquisition of Organon
BioSciences (b) 8 3 33 3
Charge related to the
fair value adjustment
to inventory related to
the acquisition of
Organon BioSciences (a) 49 258 889 258
Acquired IPR&D related
to the Organon
BioSciences acquisition (c) - 3,754 - 3,754
- ----- - -----
Total purchase
accounting adjustments,
pre-tax 177 4,080 1,449 4,080
Income tax benefit 44 89 236 89
-- -- --- --
Total purchase
accounting adjustments $133 $3,991 $1,213 $3,991
---- ------- ------- ------
Special and
acquisition-related
items:
--------------------
Special and
integration-related
activities (e) $111 $52 $329 $84
Acquisition-related
gains on currency-
related and interest-
related items (d) - (255) - (537)
- ----- - -----
Total special and
acquisition-related
items, pre-tax 111 (203) 329 (453)
Income tax benefit 31 2 56 2
-- - -- -
Total special and
acquisition-related
items $80 $(205) $273 $(455)
--- ----- ---- -----
Other specified items:
----------------------
Gain on sale of
previously announced
divestiture of certain
Animal Health products (d) $- $- $(160) $-
Income from respiratory
JV termination (f) (22) - (105) -
Gain on sale of
manufacturing plant (d) - - (17) -
Upfront R&D payments (c) - 21 - 197
- -- - ---
Total other specified
items, pre-tax (22) 21 (282) 197
Income tax
benefit/(expense) - 1 (16) 1
- - ---- -
Total other specified
items $(22) $20 $(266) $196
------ --- ------- ----
Total purchase
accounting adjustments,
special and
acquisition-related
items and other
specified items $191 $3,806 $1, 220 $3,732
==== ======= ======== ======
(a) Included in Cost of sales
(b) Included in Cost of sales, Selling, general and administrative
and Research and development
(c) Included in Research and development
(d) Included in Other expense/(income), net
(e) Included in Special and acquisition-related charges
(f) Included in Equity income
SCHERING-PLOUGH CORPORATION
Report for the period ended December 31 (unaudited):
GAAP Net Sales by Key Product
(Dollars in millions) Fourth Quarter Full Year
2008 2007 % 2008 2007 %
---- ---- - ---- ---- -
PRESCRIPTION PHARMACEUTICALS a/ $3,455 $2,963 17% $14,253 $10,173 40%
REMICADE 491 455 8% 2,118 1,648 28%
NASONEX 280 271 3% 1,155 1,092 6%
TEMODAR 242 234 4% 1,002 861 16%
PEGINTRON 225 239 (6%) 914 911 -
CLARINEX / AERIUS 160 174 (8%) 790 799 (1%)
FOLLISTIM / PUREGON c/ 127 57 N/M 577 57 N/M
NUVARING c/ 110 45 N/M 440 45 N/M
CLARITIN RX 99 93 6% 425 391 9%
AVELOX 102 115 (12%) 376 384 (2%)
INTEGRILIN 78 91 (14%) 314 332 (5%)
CAELYX 64 66 (2%) 297 257 16%
REBETOL 67 71 (5%) 260 277 (6%)
ZEMURON c/ 51 25 N/M 253 25 N/M
REMERON c/ 48 33 N/M 239 33 N/M
INTRON A 57 57 - 234 233 -
SUBUTEX / SUBOXONE 52 57 (9%) 230 220 5%
PROVENTIL / ALBUTEROL CFC 63 41 52% 190 207 (8%)
CERAZETTE c/ 44 20 N/M 185 20 N/M
LIVIAL c/ 40 24 N/M 183 24 N/M
ASMANEX 49 41 18% 180 162 11%
ELOCON 39 37 6% 176 156 13%
MERCILON c/ 31 18 N/M 159 18 N/M
IMPLANON c/ 32 15 N/M 151 15 N/M
NOXAFIL 38 29 33% 149 89 68%
MARVELON c/ 33 20 N/M 147 20 N/M
FORADIL 27 25 8% 102 102 -
Other Pharmaceuticals 806 610 32% 3,007 1,795 68%
ANIMAL HEALTH b/ 674 507 33% 2,973 1,251 138%
CONSUMER HEALTH CARE 219 254 (14%) 1,276 1,266 1%
OTC 130 161 (19%) 680 682 -
OTC CLARITIN 55 94 (42%) 405 462 (12%)
MiraLAX 30 18 66% 115 48 N/M
Other OTC 45 49 (8%) 160 172 (7%)
Foot Care 71 74 (4%) 357 345 3%
Sun Care 18 19 (6%) 239 239 -
-- -- --- ---
CONSOLIDATED GAAP NET SALES $4,348 $3,724 17% $18,502 $12,690 46%
====== ====== ======= =======
a/ Prescription Pharmaceuticals Net sales for the three and twelve months
ended December 31, 2008 include net sales of $823 million and
$3.5 billion, respectively, from the human health segment of Organon
BioSciences (OBS). Prescription Pharmaceuticals Net sales for the
three and twelve months ended December 31, 2007 include $409 million
of OBS human health segment sales subsequent to the closing date of
the acquisition on November 19, 2007.
b/ Animal Health Net sales for the three and twelve months ended December
31, 2008 include net sales of $436 million and $1.9 billion,
respectively, from the animal health segment of OBS. Animal Health
Net sales for the three and twelve months ended December 31, 2007
include $217 million of OBS animal health segment sales subsequent to
the closing date of the acquisition on November 19, 2007.
c/ Products acquired in OBS acquisition on November 19, 2007.
NOTE: 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.
SCHERING-PLOUGH CORPORATION
Reconciliation of Non-U.S. GAAP Financial Measures
Adjusted net sales, defined as Net sales plus an assumed 50 percent of
global cholesterol joint venture net sales.
(Dollars in millions) Three months ended December 31,
(unaudited)
2008 2007 %
Net sales, as reported a/ $4,348 $3,724 17%
50 percent of cholesterol joint
venture net sales b/ 531 722 (26%)
Adjusted net sales b/ $4,879 $4,446 10%
(Dollars in millions) Twelve months ended December 31,
(unaudited)
2008 2007 %
Net sales, as reported a/ $18,502 $12,690 46%
50 percent of cholesterol joint
venture net sales b/ 2,250 2,559 (12%)
Adjusted net sales b/ $20,752 $15,249 36%
a/ Net sales for the three and twelve months ended December 31, 2008
include sales from Organon BioSciences (OBS). Net sales for the
three and twelve months ended December 31, 2007 include sales from
Organon BioSciences (OBS) subsequent to the closing date of the
acquisition on November 19, 2007.
b/ Total Net sales of the cholesterol joint venture for the three months
ended December 31, 2008 and 2007 were $1.1 billion and $1.4 billion,
respectively. Total Net sales of the cholesterol joint venture for the
twelve months ended December 31, 2008 and 2007 were $4.5 billion and
$5.1 billion, respectively.
NOTE: Adjusted net sales, defined as net sales plus an assumed 50 percent
of global cholesterol joint venture net sales, is a non-U.S. GAAP
measure used by management in evaluating the performance of
Schering-Plough's overall business. Schering-Plough believes that
this performance measure contributes to a more complete
understanding by investors of the overall results of the company.
Schering-Plough provides this information to supplement the
reader's understanding of the importance to the company of its
share of results from the operations of the cholesterol joint
venture. Net sales (excluding the cholesterol joint venture net
sales) is required to be presented under U.S. GAAP. The cholesterol
joint venture's net sales are included as a component of income
from operations in the calculation of Schering-Plough's "Equity
income." Net sales of the cholesterol joint venture do not include
net sales of cholesterol products in non-joint venture territories.
CONTACT: Media, Steve Galpin, Jr., +1-908-298-7415, or Investors, JanetBarth or Joseph Romanelli, +1-908-298-7436, all of Schering-Plough
Web site: http://www.schering-plough.com/
Ticker Symbol: (NYSE:SGP)
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