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Biotech / Medical : sgp(schering plough) -- Ignore unavailable to you. Want to Upgrade?

To: Home-Run who wrote (111)	12/11/2003 4:59:42 PM
From: Home-Run	Read Replies (1) \| Respond to of 117

Realistic SGP valuation I by: the_enemy_within_02 12/10/03 11:22 pm Msg: 23664 of 23689 Well, some of the longs may not like what UBS said, but just shouting at them isn't really adequate. Let's address the points. First the analyst thinks that SGP is richly priced in comparison to other pharms. This analysis seems to be on trailing earnings, and trailing earnings only during SGP downturn. Historically, SGP has a 25% margin on $10 billion in revs. That is apprx $2.5 billion or apprx $1.66 per share. Clearly they are in for some hard times with the loss of the Claritin and Ribavarin franchises. Let's say their gross revs drop to $7 billion based on the loss of $1 billion from PEG-Intron/Ribavarin patent and $1 billion more from the loss of prescription Claritin. This does not reflect fact that despite PEG/Ribavarin being available to be marketed as a generic, there has not been any production to date from generic competition, although the Roche combination has resulted in some head to head competition. Here is a little secret about PEG/Ribavarin administration. Generics are going to have a VERY DIFFICULT time making any headway in this market because the cost of supporting the gastroenterologists prescribing and monitoring this drug really does require a very informed, expensive, and exstensive support network from the pharm manufactuer. The only one who currently has the resources to compete in any substantial way is Roche. So I think the surprise here will not be the erosion to generics as fast and as significant as an analyst who really doesn't understand the practice of medicine but understands numbers might think. The Claratin market is also not just a simple case of a generic equivalent. There is some brand name effect for the OTC product. Much like "Tylenol" still has a significant market share even though Acetaminophen is the equivalent generic and has been for probably 25 years. So lets say they have a catastrophic year this year with gross of $8 billion. With a gross margin of 75% we have $6 billion. SG&A = $3 billion (probably have an additional one time expense for some of the downsizing.) Research = $1.5 billion, leaving a profit of .5 billion or ~$.33 per share. This is with out the added value from Asmanex, international Remicade (bigger market than one would think becasue of the potential uses across a broad spectrum of inflammatory disorders), and Zetia. From YAHOO message broad