Lex: Schering-Plough
Published: May 15 2003 20:36 | Last Updated: May 15 2003 20:36
Fred Hassan, newly-anointed chief executive, aims to repeat his performance at Pharmacia & Upjohn, where he rescued the ailing Euro-American company. He must be aggressive on costs, dispose of non-core businesses and prepare to support to the hilt his Merck joint venture, which will distribute a treatment combining the companies' cholesterol drugs. Most of all, he must fill his almost empty development pipeline.
There is no doubt Schering-Plough is sick. Domestic revenues last quarter collapsed 39 per cent, as the drugs group grappled with a debilitating patent expiry on Claritin, its allergy treatment. There was no relief abroad: international revenues excluding currency effects were flat, as sales of cancer drugs, its second most important franchise, faced increased competition from Roche.
The hope must be that the worst is over. But the group is facing a cash crunch. Liquidity is a real issue as the company prepares to roll out new products and make a settlement payment for its FDA manufacturing fiasco. Schering-Plough has $3.3bn in cash and equivalents, but much of it is abroad and the group would face a punitive tax burden if it was repatriated. The dividend, yielding 3.6 per cent, is at risk. If Mr Hassan succeeds, the upside could be considerable. If he fails, in the dog eat dog world of the pharmaceuticals industry, there is always the hope of a (long-awaited) takeover. |
