Despite an EU approval just a couple of days ago — the US FDA has declared the Schering anesthesia drug Bridion^®, or sugammadex, not approvable. I’ll have much more shortly (including a shiny original graphic — DONE! — see at right), but here is the Marketwatch story. Off 9 now 7.5 percent in NASDAQ pre-market trading (small volumes, though, to be fair). Wow.

[I'm tempted to say "told ya' so" -- with my earlier prediction for FDA approval of sugammadex coming in 2009 -- but I won't. He~He!]

It seems the FDA wants additional data on allergic reactions — and while that doesn’t directly point to concerns about efficacy — it does portend a rather substantial additional delay. As I mentioned last night — it seems deficient data sets out of Schering are an emerging theme — first from two Congressional Committee Chairs, now FDA. So much for that “bump” to Schering EPS in 2008 — or even 2009(?). That would-be $600 million market just became about $200 million, for the foreseeable future. Said another way, the 2.4 cents in EPS pick-up I posited two days ago just became one shiny penny. Just one cent of EPS, for the foreseeable future. Ouch.

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U P D A T E D
08.01.08 @ 8 AM EDT:
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FDA declares the drug “non-approvable“. Ouch! So much for that $600 million. Said another way, the about 2.4 cents I posited below in 2008 Schering EPS, just became about one single little penny, in added EPS — for the foreseeable future at Schering. How much has been spent, thus far, to garner that one shiny penny? I dunno. Yikes.

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This afternoon, Schering announced that it had received EU approval for sugammadex, its new anesthesia drug. That is good news for the besmirched pharma-company. It just won’t amount to much, any time soon, in my analysis. Here is something I just wrote, albeit for another purpose. I’ll clean it up a little, later — but you’ll get the gist of it, right now:

The fact is today’s EU approval of Bridion^®, or sugammadex, won’t be enough — enough to cover the 2008 hole Vytorin has created.

Last year, in June of 2007, pre-acquisition Organon had this to say — putting its very best face on suggamadex’s market potential (press release), to lure Schering to pay-up, on acquisition:

“. . . .Organon said the global market for the drug is estimated at 400 million euros ($537 million) and could be higher. . . .”

So, Global sales of let’s call it $600 million (we see a weaker dollar now) — and, let’s say it has a 30 percent margin (probably a little too generous, but so what?), then its gross WORLDWIDE contribution to pre-tax earnings (and ultimately, after-tax EPS) will be around $180 million.

But wait! — sugammadex is not approved in the United States — and may not be, until 2009 (if one reads the FDA tea-leaves carefully), so. . . .

Let us also assume that Europe will be about 30 percent of the gobal market (again, very generously!) — then the gross contribution of suggamadex will be around $54 million, max, in 2008.

Spread that $54 million over 1.637 billion common shares outstanding (last SEC Form 10-Q), and the pretax EPS is 3.3 cents a share — after tax (assuming a 28 percent tax rate) it would be. . . .

2.4 cents per share of 2008 EPS – the 2008 Vytorin “hole in earnings” or EPS, is something like 42 cents a share of 2008 EPS (doing the math, here, from Merck’s Q1 2008 projection of $700 million of Equity Income fall-off due “solely” to the Cholesterol Joint Venture’s mishaps).

So, my best guess is that sugammadex (while a nice little pick-up) will not really matter — it won’t “move the needle much” even when the US approval ultimately comes — it won’t be nearly enough to “right the good ship Schering-Plough“. QED.

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U P D A T E D
07.30.08 AM
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Financial Analysis/Math is an acquired skill-set, folks. At a 12 times Schering-Plough P/E Multiple, then, that 2.5 cents yields 25 cents in share price increase (today’s open) — but then we must net that, against over $4.80 ($0.42 times a P/E Multiple of 12) “in the hole” [owing mostly to the uncertainties yet to come], due to ENHANCE-Vytorin fallout. And this stock skids sideways, rather than climbs (like now). But what do I know?