I have questioned Tim Anderson’s thinking — on this blog — in the recent past (that link shows Sanford C. Bernstein analyst Anderson expected SEAS would “vindicate” Schering’s Vytorin, at least in part).
It would seem that he is starting to see the less-sanguine, and more troubling reality — at least as to the Merck side of the Cholesterol Joint Venture — in the July 21 pulled-guidance from Merck. Do go read all of the Reuters report, but here is a rather punchy pull-quote:
The brokerage said slowing growth of Merck’s three product lines — heart drugs Vytorin and Zetia, asthma drug Singulair and cervical cancer vaccine Gardasil — is a concern.
“When Merck pulled guidance on July 21st, as it reported second-quarter results, it cited the future performance of Vytorin/Zetia as the sole reason. However, we believe it also had to with the other franchises starting to fall below plan,” analyst Tim Anderson wrote in a note to clients.
On that day, Merck and partner Schering-Plough Corp (SGP.N: Quote, Profile, Research, Stock Buzz) had released negative results from a Vytorin study [SEAS]. . . .
So — my abiding question, then: if the above is a problem for Merck, at one and one half times Schering-Plough’s size, on the net income line — how on Earth is it NOT a major problem for Schering, which has no-three franchise-line-up of like sized drugs — but only the one: Vytorin/Zetia? [The Bernstein firm — according to Yahoo! Biz — started Schering at “Outperform” on October 24, 2007, and hasn’t changed its outlook since then. And that stellar recommendation almost exactly two month after many clients of Sanford C. Bernstein‘s Euro-trading side bought many, many millions of dollars of Schering equity — at $27.50 per share, for the common, and the Euro-notes, and converts all likewise pegged off a $27.50 price per share. The “Outperform” came just as the Schering equity prices were starting to erode, after a run-up above $30 (Schering closed on Monday, October 22, 2007 at $29.40, down sharply, and on huge volumes, from a closing of $32.90, on the Friday before — October 19, 2007). Interesting, no?]
Vytorin/Zetia still represents north of 50 percent of all of Schering’s expected 2008 profitability, right? So, where is Bernstein’s similar announcement — cutting its outlook on Schering? That is what I’d like to know.