[UPDATED — 05.29.08 AM: The Insider — across the pond — at Pharmagossip has featured my graphic (below), and linked us, for the story, on it! Cool! Very, very!
Earlier, we added new screen-capture graphics; additional links.]
The newest Monthly Vytorin/Zetia IMS scrips were just released (mostly sub-rosa) by Schering-Plough, on a back-water page of its website — no front page reference, link or mention.
And, still no related SEC filing yet [Form 8-K filed on 05.29.08 AM — But still not even LINKED on the “Investor Relations” sub-page at Schering-Plough(see this morning’s screen-capture, below, right!)]. Sir Ed (he, of Pharmalot) badgered ’em into disclosing it, tonight, I think — Kudos! “Those sneaky lil’ devils.” Heh. Take a look (Source: IMS National Prescription Audit Plus (NPA+), as of May 14, 2008 — (in Thousands) — Click to enlarge):
So — the overall Cholesterol Franchise has fallen off dramatically in April 2008 –from a January 31, 2008 scrips level of 3,205, to a April 30, 2008 level of 2,492, or a 22.25 percent decline in three months. Let us, conservatively, I think, assume that it gets no worse than this — off about 22 percent for the full-year 2008.
Let us fairly surmise that even post-Organon, about 60 percent of all of Schering’s profitability is delivered from this franchise’s equity income line (note: not sales — income, net income). That 22.25 percent decline then, becomes a 13.35 percent decline in Schering-Plough’s profits, overall (or, 60 percent of 22.25 percent).
On January 31, 2008, Schering-Plough Common Stock closed at $19.46 per share. There were slight increases in IMS scrips data in March, over February, but now “the cat is fully out of the bag” — as of April 30, 2008, we have seen one full month, post-ACC (the American College of Cardiologists’ ENHANCE conference panel discussion was held on Sunday March 30, 2008).
A 13.35 percent decline from $19.46 yields. . . . Yep: $16.86 per share.
That is SGP’s fair value, tonight, and pre-market-open tomorrow, if we assume the market has correctly assessed all the other business-lines of Schering-Plough. And if we assume no more materially bad Schering news, for the balance of 2008. Remember though, those other business lines are/were depending on Vytorin/Zetia cash flow to help fund growth in the other projects and initiatives. In some measure, the $1.5 billion PTP charge, over four years — outlined in only the most vague of terms — by Mr. Hassan, should address some (perhaps 60 percent) of this, during 2008. But that still leaves a Schering cash-flow shortfall for 2008. How big is that shortfall? No one outside of Building K-1 really knows. [And I doubt they’ll tell us.]
Now, consider that tonight — May 28, 2008 — Schering closed at $20.09 per share — by my lights, that is about $3.25 per share above its “fair value“, tomorrow, given the above news. Schering is simply over-valued.
Thus, once all the dust settles (circa December 2008), I believe the December 2008 fair value, considering the hampered flexibility (due to decreased year-over-year cash-flow), will be closer to $16, than $17.
For my money, this stock is simply overpriced — at anything over $17.
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