The fourth phase of Schering-Plough's six- to eight-year restructuring initiative may include acquisitions as the company looks to bolster its R&D portfolio, CEO Fred Hassan said during the company's third quarter earnings call Oct. 20.

"The good news is we now have the financial headroom," he said. "Having resolved most of our difficult problems from the past, we do believe this is a great pivotal time for us to really start to move forward. That means extending our strength in R&D so we really do become a serious R&D player among our peers."

Hassan used the earnings call to announce that the company is moving into the fourth phase - "build the base" - of its five-point action agenda restructuring program initiated in 2003. The first three phases of the program included "turnaround," "stabilize" and "repair" (¹ Also see "Schering-Plough Sets Acquisition Sights On Specialty Products" - Pink Sheet, 24 October, 2005.).

The build the base phase of the restructuring plan will focus on "honing" Schering's edge, Hassan explained.

"We will be getting even more from what we have, and we will be extending our core - to new patients, new customers, new markets," he said. During this phase of the restructuring, the company will focus on expanding into new geographic regions and investing more in R&D, including both internal programs and external deals.

"Very much so, we are going to be looking at acquisitions," Hassan said. The company is already screening potential agreements and is "very much in the deal flow," according to the exec. Nonetheless, he noted, "The reason we've been selective is we're a little surprised at some of the prices our competitors are paying."

He noted that with Schering's extended exclusivity for a number of products and "the fact we have an important opportunity with the cholesterol business to expand it to new patients, we don't really need acquisitions. It's more an opportunity to build the base as opposed to having to need an acquisition."

Among Schering's most promising internal R&D programs is its investigational protease inhibitor, SCH-503034, which has been granted fast-track status by FDA and is currently in Phase II clinical trials for the treatment of hepatitis C (² Also see "Schering-Plough Takes The Long Road To Early Stage Hep C R&D" - Pink Sheet, 13 September, 2006.).

Schering also announced a partnership with Novartis in August to develop the first once-daily, fixed-dose combination asthma treatment combining a long-acting beta agonist (Novartis' investigational QAB149) and an oral corticosteroid (Schering's Asmanex ) in a single inhalation device (³ Also see "Schering/Novartis To Develop Once-Daily Inhalation Combination For Asthma, COPD" - Pink Sheet, 14 August, 2006.).

The drug maker is also developing a thrombin receptor antagonist for arterial thrombosis that has potential for use as a single agent or in combination therapy. Hassan said the TRA, in Phase II, has the potential to be a billion dollar blockbuster and is targeted for launch in 2010 or 2011.

In the meantime, Schering plans to continue to use new cholesterol data to drive sales of Vytorin . FDA recently approved new labeling for the ezetimibe/simvastatin combination showing it is more effective at lowering LDL cholesterol than AstraZeneca's Crestor (rosuvastatin) (⁴ Also see "Vytorin Label Adds Superiority Data Over Crestor" - Pink Sheet, 5 October, 2006.).

Sales of Vytorin continued to grow in the third quarter despite the launch of generic statins, the company reported. Schering's joint venture cholesterol franchise, which includes Vytorin and Zetia (ezetimibe), generated sales of $1.01 bil., up 64% over the year ago period.

- Jessica Merrill (j.merrill@elsevier.com)

Schering-Plough’s “Build The Base” Action Agenda May Include Acquisitions

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