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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 sugammadex’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! — suggamadex 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 sugmamadex 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” [mostly owing to the uncertainties — still to come], due to ENHANCE-Vytorin fallout. And this stock skids sideways, rather than climbs (like now). But what do I know?
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