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Business

Schering Pins Hopes on Breakthrough on U.S. Market

The pharmaceuticals giant is confident it's heading for a seventh consecutive record result in 2002 but admits that it needs a breakthrough on the U.S. market to maintain its current growth pace in the longer term.

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In 1961, Schering was the first to market contraceptive pills in Europe

Klaus Pohle, chief financial officer of pharmaceuticals giant Schering AG, told Handelsblatt that the group will book its seventh record result in succession in 2002. Net earnings are set to come in above 1 billion euro by quite some margin, he said.

Even after the deduction of extraordinary earnings from the sale of Aventis Cropscience, the group is still heading for a record result.

According to unofficial internal estimates, operating profit is set to come in at more than 450 million euro, an increase of some 12% from the level expected for 2001.

Schering appears unaffected by the problems that have beset many of its rivals, such as delays in drugs registrations in the United States and growing competition from producers of generic drugs. Furthermore, all of its patents are secured for the next five years.

The group's recipe for success – to lead in specialist markets – has not changed and in Pohle's view will hold in the future.

Continuity in management is another factor that's seen to have aided in Schering's success.

Pohle has been a member of the management board for 21 years, and Chairman Hurbertus Erlen for 16 years.

The most prominent example of Schering's strategy is the contraceptive pill, which was launched by the group for the first time in Europe in 1961. Searle brought the first contraceptive pill onto the U.S. market one year earlier.

Today, according to Feng Si, analyst at Bankgesellschaft Berlin, Schering is global market leader in fertility control and in hormone-replacement therapy.

In 2000, these products accounted for 30% of total group sales of around 4.5 billion euro.

This was as much as its remaining portfolio of therapeutic products could manage between them.

But the group's largest single generator of sales revenue is its multiple-sclerosis treatment Betaferon, which for some variations of the condition remains the only registered drug worldwide. Betaferon accounts for 15% of group sales.

Schering's remaining revenue is generated mostly with diagnostics.

Betaferon's patent runs out in five years. By then, the group will have had to develop other strong-selling drugs if it is to maintain its current growth pace.

But in the next two years, Pohle expects growth to be boosted by hormone products.

His optimism is based on the demand for Schering's latest contraceptive pill, Yasmin, which has exceeded the group's expectations to such an extent that its launch was delayed in some countries for fear that supply could not be kept up.

From 2005, Schering is pinning its hope on additional hormone products, including some for men.

The group also plans to launch drugs to treat hormone-related tumors.

Pohle said a breakthrough of its hormone treatments on the U.S. market was essential for Schering. Its market share there, excluding Yasmin, stands currently at 4%.

The second most important single market for the group is Japan but a boom in sales of the contraceptive pill, launched there first at the end of 1999, has so far not materialized.

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