Schering 1Q profit drops 48 pct mostly from takeover costs

By LINDA A. JOHNSON AP Business Writer

TRENTON, N.J. (AP) - Schering-Plough Corp. on Wednesday reported a 48 percent plunge in first-quarter profit, primarily from costs related to its biggest acquisition ever, and the drugmaker trounced Wall Street expectations.

Schering-Plough posted net income of $253 million, or 15 cents per share, down from $543 million, or 36 cents a share in 2007's first quarter. Last November, Schering-Plough bought biotech company Organon BioSciences, which makes women's and animal health products, for nearly $14.5 billion.

Excluding approximately $690 million in acquisition-related costs and some other one-time items, Schering-Plough said it would have reported earnings of $862 million, or 53 cents per share.

That beat by 16 cents the forecast of analysts surveyed by Thomson Financial, who expected 37 cents per share, excluding one-time items.

Revenues, boosted by $1.3 billion from sales of Organon products, jumped 56 percent to $4.66 billion, slightly more than the $4.5 billion analysts anticipated.

Shares were up 6 percent, or $1.02, to $18.16 in midday trading Wednesday.

"The 16-cent beat was spectacular," Morgan Stanley pharmaceuticals analyst Jami Rubin told company executives during a conference call.

Chief Executive Officer Fred Hassan told The Associated Press in an interview that analysts likely expected the acquisition would reduce earnings per share until later this year, but it increased them by 4 cents in the quarter.

He said results also were boosted by favorable exchange rates, rising sales in the combined company's animal health business - which leapfrogged to No. 1 worldwide - and strong growth in foreign markets for medicines, including arthritis and inflammatory disease treatment Remicade and cholesterol drugs.

Kenilworth, N.J.-based Schering-Plough and partner Merck & Co. jointly sell Vytorin and Zetia, whose U.S. sales fell 5 percent in the quarter after the companies' study showed pricey Vytorin controls plaque buildup in arteries no better than generic Zocor; it did reduce bad cholesterol more. Vytorin combines Zetia and Zocor.

Despite controversy over whether the companies delayed releasing the results to protect sales, including ongoing congressional probes, overseas sales jumped 44 percent and amounted to nearly one-third of their total $1.2 billion in first-quarter revenues. Counting Schering-Plough's share, its revenues totaled $5.3 billion.

Hassan told analysts the company is on track with its plan to cut annual costs by $1.5 billion by 2012, announced earlier this month. About 10 percent of its 55,000 jobs are to be cut.

"They will start soon, some this quarter, some next quarter," he told the AP, adding that changes to integrate Organon already have begun.

The company's biggest division, pharmaceuticals, had revenues of $3.6 billion, led by Remicade, which saw sales jump 36 percent to $507 million.

Animal health products sales totaled $723 million, while sales of consumer products were $377 million.

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