Monday, January 30, 2006

Before the Bell: Schering Reports Earnings

The bloated pharmaceutical industry recovers from the nuclear blast known as patent loss.

Schering Plough (SGP) sure as heck didn't escape the wrath.

Once a $60 number, Schering saw its shares more than halved after its key allergy drug Claritin lost patent and the industry as a whole faced regulatory woes.

Schering's old management was, for the most part, ineffective. The stock roiled and the pharma world turned its attention to nimble generic drug makers whose "low cost, high intellect" business model served them well.

Today, Schering is a new beast.

Under the new stewardship of Fred Hassan, the drug company has been making a quiet but impressive turnaround. SGP has plenty of cash on its balance sheet. Zetia, the cholesterol-control medicine that Schering-Plough developed in its joint venture with Merck (MRK), has been a spectacular success. The drug has a novel mechanism of action that inhibits the absorption of cholesterol in the digestive tract.

Schering-Plough recently signed an agreement with research behemoth Bayer (BAY) to market Bayer's pharma product line in the US.

CEO Fred Hassan himself brings plenty to the table. A seasoned veteran, Hassan previously played a key role in Sandoz Pharmaceuticals' sale to Novartis (NVS), as well as Pharmacia Upjohn's to Pfizer (PFE). Don't count out a possible sale of Schering to a competitor/strategic partner.

Analysts are looking for Schering to earn a quarterly profit of 8 cents per share on revenue of $2.39 billion, compared with a year-ago loss of 2 cents per share on sales of $2.18 billion.

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