Schering-Plough is ending its supply management program for PEG-Intron (peginterferon alfa-2b) based on enhanced production capacity for the hepatitis C agent.

In a Feb. 18 letter to the trade, Schering informed prescribers and distributors that "patients will now be able to take their prescriptions...directly to their pharmacy to be filled."

The company created the "Access Assurance" program in October 2001 in light of supply constraints following a strong launch for PEG-Intron (¹ Also see "PEG-Intron Access Program Requires ID Number, Designed To Ensure Supply" - Pink Sheet, 5 November, 2001., p. 20). New patients were placed on a wait list for most of 2002; the wait list was cleared in September.

Even in the absence of a wait list, patients have still been required to obtain an "Access Assurance ID number" before filling a prescription.

"Enhancements to our biotechnology production facility in Brinny, Ireland, increased product output and allowed us to eliminate the Access Assurance program," the company explained.

The wait list was cleared at about the time Roche launched its pegylated interferon brand Pegasys (² Also see "Roche Pegasys Has 23% Market Share; Better Luck In Rematch With Intron? " - Pink Sheet, 3 March, 2003., p. 10).

Schering is continuing to sponsor the "Be In Charge" hepatitis C support program, which provides nurse counseling and other services free of charge to Intron patients. The company's letter to the trade also notes that its "Commitment to Care" program will continue to provide free therapy to patients who qualify; the company notes that in 2002 it provided therapy valued at over $100 mil. to 25,000 hepatitis C patients.

The shutdown of the PEG-Intron access program should make Schering's promotional efforts simpler, and help to eliminate any lingering concern among prescribers regarding supply.

The launch of Pegasys is one factor Schering cited in a March 5 press release downgrading earnings guidance for 2003 - and retracting prior guidance towards a strong showing in 2004 and 2005.

The company reduced its 2003 earnings forecast by 25%, from $1-$1.15 per share to $0.75-$0.85 per share. The reduction comes after the company twice cut its forecasts for 2002 in October and immediately after the end of the year. The company then restated its results soon after reporting to reflect a $150 mil. increase in litigation reserves (³ Also see "Schering Sets Aside $150 Mil. For Liabilities In Marketing Investigations" - Pink Sheet, 3 March, 2003., p. 4).

Schering noted that it is in a "transition" period marked by the disappearance of prescription revenues from Claritin following the launch of OTC versions of loratadine and by heavy investment in the launch of the cholesterol agent Zetia .

The press release suggests, however, that other factors are driving the latest forecast, including "the intense U.S. competition it is experiencing in the allergy category" and the potential for PEG-Intron sales to fall short of targets.

Schering cited "lower than expected patient demand in Japan for its hepatitis C treatments" and "new competition in the hepatitis C category in major markets."

The company added that it "is anticipating the possibility of generic ribavirin competitors in the U.S. in 2003." Schering markets the ribavirin brand Rebetol for use in conjunction with its interferon products. Three Rivers, Teva and Geneva are challenging the Rebetol patents; Schering has listed 10 separate patents running until 2018 in the "Orange Book."

The March 5 earnings warning also includes a blanket disavowal of any prior forecasts: "with today's announcement, Schering-Plough said it is withdrawing any previous earnings guidance." The company has previously forecast a strong rebound in 2004, with earnings per share growth of at least 20%.

The formal withdrawal of that projection may be the final step in clearing the way for new management at Schering. CEO Richard Kogan is scheduled to step down in April at the latest, and Pharmacia CEO Fred Hassan is viewed as ready to step in upon the closing of Pharmacia's merger into Pfizer.

The reaction to the earnings warning, however, will also mean that Schering's new management will have to be wary of uninvited merger solicitations. As of March 6, the company was trading at a six-year low with a market valuation below $24 bil. - or about one-tenth the combined value of Pfizer and Pharmacia.

Schering PEG-Intron Supply Constraints Resolved; Earnings Forecast Cloudy

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