Schering Buys Great Growth

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Schering-Plough (NYSE: SGP) may have purchased Organon Biosciences at just the right moment. While sales of its cholesterol-drug franchise with Merck (NYSE: MRK), Vytorin and Zetia, dropped 15% year over year, this acquisition could help the company boast a 63% increase in revenue.

Even the bottom line looked good after factoring in charges and gains associated with the acquisition -- adjusted EPS rose 39% to $0.39 per share.

The new revenue stream from Organon wasn't the only boost to the company's top line; sales of some of its existing products are still on fire. Remicade, which it sells outside the U.S. for Johnson & Johnson (NYSE: JNJ), grew 32%. Brain cancer treatment Temodar saw sales jump 27%, on its way to blockbuster status.

For almost this entire year, Schering and Merck have been dealing with the Enhance data, which suggested that Vytorin might be no better than a generic statin at keeping plaque out of arteries. The good news for Schering-Plough is that U.S. patients don't seem to be switching to Pfizer's (NYSE: PFE) Lipitor -- U.S. sales for that drug were down 13% year over year in the third quarter. If they're now on an inferior generic statin instead, doctors may find that patients aren't achieving their cholesterol goals, and put them back onto Vytorin -- after all, it has been proved to lower cholesterol.

Even under the best circumstances, I doubt Vytorin could resume the growth curve it was on before the Enhance data was released. Instead, Schering will have to look for future growth from the pipeline it inherited when it purchased Organon, along with boceprevir, its hepatitis C drug candidate, which is racing Vertex Pharmaceuticals (Nasdaq: VRTX) to reach the market.

Like I said, that acquisition came just in the nick of time.

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