Schering-Plough Corporation (NYSE: SGP) today reported financial results for the third quarter of 2007 and commented on its planned acquisition of Organon BioSciences N.V. (OBS), which includes the Organon human health business and Intervet animal health business.

"Schering-Plough has now recorded its 12th consecutive quarter of double- digit adjusted sales growth," said Fred Hassan, chairman and CEO. "Schering- Plough's long-term strategy continues to unfold. Our strategy to grow the top line, exercise financial discipline and expand our R&D pipeline again delivered strong results."

Added Hassan: "Our focus on building R&D excellence is beginning to bear fruit. With the upcoming acquisition of Organon BioSciences, we will have a total of 12 significant projects in Phase III -- we will have a pipeline with a Phase III bulge. This, combined with relatively long exclusivity of our marketed product portfolio, puts Schering-Plough in a substantially stronger position in terms of its late-stage pipeline and portfolio than only four years ago," said Hassan.

For the 2007 third quarter, Schering-Plough reported net income available to common shareholders of $713 million or 45 cents per common share on a GAAP basis. Excluding acquisition-related items and an upfront R&D payment, earnings per share for the 2007 third quarter would have been 28 cents (see table below on page 13). For the 2006 third quarter, Schering-Plough reported net income of $287 million or 19 cents per common share on a GAAP basis.

Net sales for the 2007 third quarter rose 9 percent on a GAAP basis and 12 percent on an adjusted basis versus the 2006 period. GAAP net sales for the 2007 third quarter totaled $2.8 billion; adjusted net sales, which includes an assumed 50 percent of global cholesterol joint venture net sales (see table below on page 12 and hereinafter referred to as "adjusted sales") for the 2007 third quarter would have totaled $3.5 billion compared to $3.1 billion on a similar adjusted basis in the 2006 third quarter. Schering-Plough does not record sales of its cholesterol joint venture with Merck & Co., Inc. (Merck), as the venture is accounted for under the equity method.

Hassan noted that Schering-Plough's expanding Phase III pipeline should provide important future strength. Schering-Plough recently advanced two compounds into Phase III trials -- vicriviroc for HIV and a thrombin receptor antagonist (TRA) for atherothrombosis; both have been granted "fast track" designation by the U.S. Food and Drug Administration (FDA). The number of patients in clinical trials in 2007 has increased substantially versus 2006, and is expected to increase again next year. This level of expanded R&D is unequaled in the company's history.

As Schering-Plough advances in the Build the Base phase of its six- to eight-year Action Agenda, it has continued to resolve issues from the past -- most recently, the dissolution in August 2007 of the FDA consent decree, first entered into in May 2002, by the U.S. District Court for the District of New Jersey (Newark).

"This was an unprecedented and heroic achievement by our people," said Hassan. "We are a company that stands out for injecting quality, compliance and business integrity into our DNA."

Organon BioSciences Update

Since the March 12 announcement, Schering-Plough has made significant progress toward completing the acquisition of OBS from Akzo Nobel N.V. This includes gaining European Commission approval for the acquisition and completing most of its financing plan by securing nearly $9 billion in financing through a mix of equity and debt of varying maturities (3-30 years). The company has completed a customary consultative process with the OBS Works Council in the Netherlands in a positive manner, which will facilitate the transaction with Akzo Nobel.

"The acquisition of Organon BioSciences will create a world-class human health business balanced by the diversification of a world-class animal health business, with its cash flow and strong operating margins," said Hassan. "We will be focused relentlessly on doing the right things to realize the enormous long-term promise of this combination. This means focusing on top-line growth, advancing key R&D projects, continuing to achieve productivity gains across the company and forging a unified, high-performance culture."

In connection with the European Commission clearance, Schering-Plough has agreed to divest certain animal health products in Europe. The divestitures are not expected to be material to the company's financial results. Schering- Plough still needs to secure certain other regulatory approvals, including clearance from the U.S. Federal Trade Commission (FTC), and continues to expect the transaction to be completed by year-end 2007.

Third Quarter 2007 Results

For the 2007 third quarter, Schering-Plough reported net income available to common shareholders of $713 million or 45 cents per common share on a GAAP basis. Excluding acquisition-related items and an upfront R&D payment, earnings per share for the 2007 third quarter would have been 28 cents. The GAAP results include a favorable impact of 17 cents per share comprised of a net benefit of $294 million for acquisition-related items (primarily due to a mark-to-market gain on a currency option) and a charge of $20 million for an upfront licensing payment.

For the 2006 third quarter, the company reported net income available to common shareholders of $287 million or 19 cents per common share on a GAAP basis.

GAAP net sales for the 2007 third quarter totaled $2.8 billion, up 9 percent as compared to the third quarter of 2006. The sales growth reflects a 3 percent favorable impact from foreign exchange and a 2 percent unfavorable impact related to the reversal of accrued rebates in the 2006 third quarter for the TRICARE Retail Pharmacy Program in the United States.

Global cholesterol joint venture net sales, which include VYTORIN and ZETIA, totaled $1.3 billion in the 2007 third quarter, a 26 percent increase compared to net sales of $1.0 billion in the comparable 2006 period. Schering-Plough does not record sales of its cholesterol joint venture with Merck as the venture is accounted for under the equity method. Including an adjustment of an assumed 50 percent of the global cholesterol joint venture net sales, Schering-Plough's adjusted sales for the 2007 third quarter would have been $3.5 billion, a 12 percent increase, compared to $3.1 billion on a similar adjusted basis in the 2006 third quarter.

Overall, Schering-Plough shares in approximately 50 percent of the profits of the joint venture with Merck, although there are different profit-sharing arrangements for the cholesterol products in countries around the world. Schering-Plough records its share of the income from operations in "Equity income from cholesterol joint venture," which totaled $506 million in the 2007 third quarter versus $390 million in the third quarter of 2006. Schering- Plough noted that it incurs substantial costs such as selling, general and administrative costs that are not reflected in "Equity income from cholesterol joint venture" and are borne by its overall cost structure. There is a separate co-marketing agreement with Bayer for ZETIA in Japan, where the product was launched in June 2007.

Sales of REMICADE increased 34 percent to $426 million in the third quarter of 2007 due to continued market growth and expanded use across indications. REMICADE is a treatment for inflammatory diseases that Schering- Plough markets in countries outside the United States (except in Japan and certain other Asian markets) for rheumatoid arthritis, early rheumatoid arthritis, ankylosing spondylitis, psoriatic arthritis, plaque psoriasis, Crohn's disease, pediatric Crohn's disease and ulcerative colitis.

Global sales of NASONEX, an inhaled nasal corticosteroid for allergies, rose 10 percent to $242 million versus the 2006 period, due to increased sales in international markets.

Sales of PEGINTRON for hepatitis C increased 7 percent to $221 million in the 2007 third quarter due to higher sales in Latin America and emerging markets across Europe, and tempered by lower sales in Japan and the United States.

Sales of TEMODAR, a treatment for certain types of brain tumors, grew 20 percent to $215 million due primarily to increased sales across all geographic markets, including Japan, where the product was launched in September 2006. The growth rate for TEMODAR is expected to continue to moderate as significant penetration in U.S. and EU markets has already been achieved for this product.

Global sales of CLARINEX, a nonsedating antihistamine, in the third quarter of both 2007 and 2006 were $171 million. Higher sales of CLARINEX in international markets were offset by lower sales in the United States. International sales of prescription CLARITIN were $83 million in the third quarter of 2007 compared to sales of $74 million in the third quarter of 2006.

Among other prescription products posting higher sales in the 2007 third quarter was the antibiotic AVELOX, up 24 percent to $78 million, as a result of increased market share.

Consumer Health Care sales were $273 million in the 2007 third quarter, up 5 percent versus the 2006 period. The increase was primarily due to sales of MiraLAX, which was launched in February 2007 as the first Rx-to-OTC switch in the laxative category in more than 30 years; higher sales of OTC CLARITIN; partially offset by a decline in sun care sales.

Animal Health sales increased 8 percent to $248 million, reflecting solid growth internationally, led by the poultry, companion animal, aquaculture and swine product lines, coupled with a positive impact from foreign currency exchange rates. The growth in international markets was tempered by a decline in the United States.

Schering-Plough incurs substantial costs such as selling, general and administrative costs that are not reflected in "Equity income from cholesterol joint venture" and are borne by the overall cost structure of Schering-Plough. As a result, Schering-Plough's gross margin and ratios of selling, general and administrative (SG&A) expenses and R&D expenses as a percentage of sales do not reflect the benefit of the impact of the cholesterol joint venture's operating results.

On a GAAP basis, Schering-Plough's gross margin was 67.1 percent for the 2007 third quarter as compared to 65.6 percent in the 2006 period.

SG&A expenses were $1.3 billion in the third quarter of 2007, up 9 percent versus $1.2 billion in the prior-year period. SG&A in the third quarter of 2007 increased primarily due to increased promotional spending.

Research and development spending for the 2007 third quarter increased to $669 million compared to $536 million in the third quarter of 2006. Included in R&D spending in the third quarter of 2007 was $20 million related to an upfront payment made for in-licensing acadesine, a Phase III cardiovascular agent for ischemia-reperfusion injury. The increase in R&D expenses was also due to higher spending for clinical trials and related activities, and investments to build greater breadth and capacity to support the dramatic expansion of Schering-Plough's Phase III pipeline during the past 12 months.