Schering-Plough reported net income of $287 million, or $.19 per share, on a GAAP basis for 2006 third quarter. This represents a 567.44% increase over the same period last year. GAAP net sales for the 3Q ’06 came in at $2.6 billion, up 13% from 3Q ‘05.
"Three years ago, this company was facing severe challenges," points out Fred Hassan, chairman and CEO of Schering-Plough. "Today, we are achieving solid growth across a broad front. We have been the fastest-growing company in our peer group for the past year."
Net sales do not include the cholesterol joint venture with Merck & Co., as the venture is accounted for under the equity method, explains Schering-Plough. Including an adjustment of an assumed 50% of global cholesterol joint venture net sales, Schering-Plough calculated its net sales for the 3Q ’06 as $3.1 billion, a 19% increase compared to the same period last year.
"We are pleased that sales of our cholesterol joint venture have continued to grow this year, even with the U.S. introduction of new generic statins," says Hassan.
The company also holds a separate co-marketing agreement with Bayer for Zetia in Japan where the product is currently under regulatory review for the treatment of cholesterol. Under the equity method, the company says it records its share of the income from operations in "equity income from cholesterol joint venture," which totaled $390 million in the 2006 third quarter versus $215 million in the third quarter of 2005.
The overall sales increase was driven by growth in prescription pharmaceuticals, including higher sales of Remicade, Nasonex, Peg-Intron hepatitis C product, Clarinex, and Temodar, reports Schering-Plough. "While our cholesterol franchise has been pivotal to our success, we are also pleased with the important contributions from other key products, such as our rejuvenated Nasonex allergy treatment and Remicade with its expanded range of indications," adds Hassan.
The two highest growth rates were in Remicade and Nasonex. Sales in 3Q ’06 for Remicade was up 34% to $317 million, primarily due to expanded indications and continued market growth, explains Schering-Plough. Global Nasonex sales also rose 30% to $221 million and U.S. sales climbed 41% to $153 million. According to the company, this growth rate is based on greater market share as compared to the 2005 period.
Sales of Temodar grew 18% to $179 million due to increased utilization outside the U.S. for treating newly diagnosed glioblastoma multiforme (GBM), according to the company. Schering-Plough does predict that the growth rates for Temodar may moderate going forward, as significant market penetration has already been achieved in the treatment of GBM, especially in the U.S.
On a GAAP basis, the company's gross margin was 65.6% for 3Q ’06 as compared to 66% in the 2005 period. Selling, general, and administrative (SG&A) expenses were $1.2 billion during this period, up 9% versus $1.1 billion in the prior year period. SG&A reflected ongoing investments in emerging markets and field support for new launches as well as higher promotional spending, explains the company.
R&D spending decreased 5% to $536 million compared to the 3Q ’05. Schering-Plough says the decrease was due to a one-time charge in 2005 of $124 million resulting from the exercise of the rights to develop and commercialize golimumab. The decrease was offset by higher costs associated with clinical trials and to support the company's expanding pipeline. The company expects R&D spending to continue to reflect the progression of the early-stage pipeline and increased clinical trial activity.