NEW YORK—Shares of Schering-Plough Corp. rose 4 percent Monday, continuing to recover from last week's severe losses sparked by negative data on its blockbuster cholesterol drug Vytorin.
The Kenilworth, N.J.-based drugmaker saw its stock plunge 26 percent on March 31, and tumble to a record low of $13.83 Wednesday after results from the ENHANCE study showed Vytorin was no more effective at preventing cardiac plaque buildup than the much cheaper generic Zocor.
But the stock began to recover Thursday, as Wall Street praised Schering-Plough's plan to cut 10 percent of its 55,000-person staff, mostly in the U.S., to save $1 billion annually by 2012. The move will help offset the expected dive in Vytorin sales as physicians recommend older, cheaper cholesterol drugs.
On Monday, shares rose 64 cents to close at $16.76. The stock is still down 50 percent from its 52-week high of $33.81, reached nearly one year ago.
Natixis Bleichroeder analyst Jon LeCroy said investors should look beyond the ENHANCE results. With 13 potential product launches through 2011, he believes Schering-Plough has the best pipeline in the industry, as well as the fastest earnings growth and least exposure to patent expirations.
"Once the final press resurgence is over, we expect Schering shares to be able to recover and become the top large cap pharma performer for the remainder of 2008," LeCroy wrote in a note to clients. He reiterated a "Buy" rating and $25 price target on the stock.
He points out that Schering's patent exposure through 2012 is the best in the industry by a large margin, with just allergy drug Clarinex and chemotherapy treatment Caelyx (totaling 6.3 percent of 2008 sales) exposed to patent losses.
"The net impact of the two suggests that Schering will be the only company in the industry with new products that will more than replace its patent losses through 2012," LeCroy said. "When the pipeline is combined with the newly announced, aggressive, cost-cutting measures, the result is overwhelmingly the best growth in the group. Even assuming flat Zetia and Vytorin sales through 2012, we estimate SGP will grow in excess of 15 percent for 2007 to 2012."
