默克藥廠 (MRK) 2008 Q2 法說會逐字稿

Good afternoon.

My name is Ellie and I will be your conference operator today.

At this time, I would like to welcome everyone to the Schering-Plough 2008 second quarter earnings conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer session.

(OPERATOR INSTRUCTIONS).

Thank you.

I would now like to turn the conference over to Ms.

Janet Barth, Vice President of Investor Relations.

Ms.

Barth, you may begin your conference.

Thank you, Ellie.

And good afternoon, everyone.

And welcome to the Schering-Plough 2008 second quarter conference call.

We know many of you have another call scheduled right after ours, so we plan to wrap up our call a little before 5:30.

Before we begin, I would like to cover a few items.

First, some of the statements made on our call may be considered forward-looking statements.

The company's SEC filings, including our first quarter 10-Q, identifies certain factors that could cause the company's actual results to differ materially from those projected in any forward-looking statements made this afternoon.

The company's SEC filings as well as today's earnings release and tables are available at Schering-Plough.com.

Also furnished as exhibits in our 8-K filing today are the two press releases issued today by independent investigators relating to the SEAS study.

Finally, I would also note that during the call, we may refer to non-GAAP measures including adjusted net sales, or adjusted top line sales, which is a non-GAAP measure that we define as our GAAP net sales plus an assumed 50% sales contribution from our cholesterol JV.

We will also refer to as-reconciled amounts or amounts on a reconciled basis.

As-reconciled amounts exclude purchase accounting adjustments, acquisition-related items and other specified items.

Please refer to the non-US GAAP reconciliation tables for a reconciliation of these adjusted figures to our reported GAAP results.

These can be found under financial highlights in the investor relations section of our web site.

This afternoon, I'm joined by Fred Hassan, our Chairman and Chief Executive Officer, Bob Bertolini, our Chief Financial Officer, and Carrie Cox, the Head of our Global Pharmaceuticals.

Now, I'd like to introduce Fred Hassan.

Thank you, Janet.

I'll open with come comments and I'll be followed by Bob Bertolini and then Carrie Cox, and then we'll open up for Q&A.

As many of you will be aware, data was just released today from the SEAS trial sponsored by the Merck/Schering-Plough joint venture.

The SEAS study looked at a possible new use for Vytorin in patients with aortic stenosis, that is hard or poorly functioning heart valves.

Many of you may also have been listening to Dr.

Pederson, the lead investigator, and the other experts in their conference call update on the study earlier today.

What I took away was that this study confirmed the results from other cholesterol-lowering agents that reducing LDL does not reduce the rate of progression of aortic valve disease, and I was encouraged by the comments by the lead investigator and other experts that Vytorin had good data.

In fact, Vytorin had positive outcomes data reducing the risk of coronary artery disease in these patients.

At this point, we want to leave the interpretation of the science to the independent scientists.

So we won't be discussing this further on our call today.

And now I'm going to turn to the strong Q2 results we're reporting.

Our strong performance in the second quarter demonstrates the strength and diversity that we have built at Schering-Plough on many fronts.

We continue to focus on the basic strategy of our action agenda.

We continue to grow the top line.

We continue to grow the pipeline and we continue to invest wisely, while reducing our costs.

We've also continued to effectively manage our challenges.

Today, we along with the entire global pharmaceutical industry are facing many pressures.

Our long-term focus on driving growth and building diversity has served us well.

We have strength from diversity on four important fronts.

First, we have diversity from diversity in our products.

An important part of our strategy has been to build our strength in biologics as well as small molecules.

As a result, we are benefiting from the value migration to biotech that we expect will continue.

We have achieved a good balance between small molecules and biologics.

In the second quarter, nearly 30% of our sales came from biologic products.

For example, with over $550 million in sales this quarter, Remicade is now annualizing at over $2 billion.

With its broad range of indications, Remicade is making a real difference in the lives of patients, many of whom have regained their mobility and their freedom.

And we have Golimumab, which is under regulatory review in Europe.

Pegintron also demonstrates a long heritage of innovation in biologics.

With the OBS transaction, we are among the world leading biotech fertility franchises.

In Animal Health, we are a global leader in vaccines, through a shared sciences platform we see this science contributing to our human health R&D.

Remicade and other growth drivers are helping us to power through the cholesterol challenge we face in the United States.

The second dimension of our diversity is geographic.

Back in '01, our industry relied on the US for more than half of its growth.

Today, across our industry, the US has become a very challenging market, so we are fortunate that now, 70% of our sales come from outside the US this quarter.

Our long-term strategy to invest in newer markets is also coming through.

Today, we're strong in many of those markets, such as Brazil, where our growth rates are much higher than in the established markets.

The third dimension of diversity is our business segments.

Sector risk for innovation based human RX pharma is increasing, so diversification into areas such as Consumer Healthcare and Animal Health is adding value.

For the past five years, we've been focusing on Consumer Healthcare and Animal Health.

We've been building strength in Consumer Healthcare.

This is visible in the strong RX to OTC switch of MiraLax last year.

According to Drugstore Age, MiraLax has now reached the same market share zone as Metamucil in the powder category.

We're also proud of the leading position we have maintained in the US with Claritin, despite an aggressive competitive launch.

We're now working to diversify our strong US Consumer Healthcare business into other markets such as China.

A key strategy of our combination with Organon Biosciences was to create a very strong Animal Health business.

Today, we have a world leading Animal Health unit that is growing strongly and we have world class Animal Health R&D.

So with our RX, our Consumer Healthcare and our Animal Health units, we have a lot of strength from business diversity.

Fourth and most importantly for the long term, we have the strength of our robust pipeline.

With more than 10 compounds in Phase III or filed, our late stage pipeline is one of the strongest and most diverse in our industry.

We are pleased with the positive opinion from the European authorities on sugammadex, and with the unanimous positive recommendation from the FDA panel.

We are also excited about golimumab and asenapine as well as our other late stage compounds including TRA.

We look forward to telling you more about the exciting compounds in our pipeline during our R&D update meeting, which will be held in late November.

Further details about the meeting will be available soon.

And we should not forget the strong expected exclusivity on the key growth driving products, most of them protected into the middle of the next decade.

This means that our robust pipeline will be additive to the current portfolio.

This is a very favorable situation compared to many of our peer companies.

The strength and diversity we have today results from our five years of hard work.

A key step on that journey of transformation was the acquisition of OBS.

After two full quarters, we can see that our combination is succeeding.

The solid foundation that we have built at Schering-Plough since '03 gave us the strength to take on a big acquisition.

The OBS combination has made us even stronger and more diverse.

It is unusual to see accretion in the first year of a major complex acquisition like this one.

Yet we had an OBS contribution to our performance in the first quarter of this year.

And it continued to contribute in the second quarter.

This illustrates the value of the combination and our execution on the integration.

We folded the ongoing integration actions into the Productivity Transformation Program, or PTP, when we announced PTP in April.

PTP is designed to make us an even stronger, leaner and more flexible company.

We are getting results.

We are taking costs out of the system, we're taking work out of the system.

We are driving productivity improvements across the organization.

In summary, when we look at the challenging environment that faces our entire industry, the strength and diversity that we have built at Schering-Plough gives us a special edge for the long term.

And now, let me turn over to Bob.

Thanks, Fred, and good afternoon, everyone.

As Fred mentioned, this is our second full quarter of combined operations with Organon BioSciences, and we're pleased to see that OBS continues to add to our performance.

Our positive results in the second quarter reflect our ongoing efforts to manage the challenges in our business.

In addition, we're harnessing the potential of our strategic OBS acquisition.

On a reconciled basis, we earned $0.45 per share in the second quarter.

Consistent with the first quarter, this amount excludes purchase accounting adjustments and special and acquisition-related charges.

It also excludes income from the termination of our respiratory joint venture with Merck.

Over the next few minutes, I would like to review the key drivers of our quarterly sales performance, review highlights of our operations and finally wrap up with some comments on our Productivity Transformation Program, which includes the ongoing OBS integration.

First, our sales performance for the quarter.

On a GAAP basis, our net sales increased to $4.9 billion, and include about $1.4 billion in sales from OBS.

Excluding OBS sales, net sales for Schering-Plough on a stand-alone basis would have been $3.5 billion, an increase of more than 9% compared to the prior year.

Currency was again favorable this quarter, contributing an estimated 7.6% to the Schering-Plough stand-alone sales growth.

Now, if we include and assumed 50% contribution from the cholesterol joint venture, our adjusted net sales were $5.5 billion this quarter.

Global sales of the cholesterol franchise were down about 10%, compared to the prior year period, with a 26% decline in the US, offsetting continued growth in other markets.

Outside the United States, cholesterol franchise sales increased 37% to about $450 million in the second quarter.

Overall, our prescription pharma sales this quarter benefited from three key factors.

First, about $920 million in sales from Organon, including contributions from Nuvaring and Follistim.

Second, solid growth of Remicade and Temodar, and finally, we benefited from currency.

Meanwhile, as Fred mentioned, the US prescription market continues to be challenging across the industry.

Carrie will talk more about the performance of our global prescription brands in a few minutes.

Also as Fred noted, our business diversity has strengthened with about 25% of our reported sales this quarter coming from our Animal Health and Consumer Healthcare businesses.

Turning to Animal Health, second quarter sales were $818 million, including more than $520 million from the acquired OBS Animal Health business.

Our product portfolio within Animal Health can be grouped into two main categories: Biologics and Pharmaceuticals.

This quarter, sales were roughly split evenly between the two groups.

In Biologics, we're a market leading vaccine producer.

Just this quarter, we launched a new vaccine for the treatment of Bluetongue Disease.

This disease primarily affects cows and sheep in Europe and we're pleased with the launch so far.

Our other Animal Health products consist of a wide range of pharmaceuticals, such as anti-infectives, anti-inflammatories and anti-parasitics.

Turning now to the Consumer Healthcare business, our sales this quarter were about $400 million.

MiraLax led the growth this quarter, with sales of $28 million.

Sun care and foot care also contributed to our growth.

Meanwhile, OTC Claritin sales were unfavorably impacted by the timing of shipments, a less severe allergy season, and increasing competition.

Moving to earnings, on a GAAP basis, we recorded earnings of $0.24 per share.

As I mentioned earlier, when you exclude purchase accounting adjustments, special and acquisition-related charges, and the $64 million of income related to the termination of the respiratory joint venture, we earned $0.45 per share on a reconciled basis.

Before going further, let me remind you, this year we expect to record income of $105 million from this termination.

So we will be recording another $41 million as income during the second half of 2008.

This income is recorded in the GAAP equity income line, but excluded from our reconciled earnings.

Let me now review some highlights of our operations.

On a reconciled basis, our gross margin in the second quarter was 68.4%, representing a decline on a year-over-year and sequential basis.

On a sequential basis, the gross margin decline was primarily impacted by Remicade and Avelox, as well as growth in our Animal Health business.

Moving to SG&A, expenses were $1.9 billion in the quarter.

Excluding the impact of currency, and estimated OBS expenses, our SG&A costs were roughly flat on a year-over-year basis.

Moving to R&D, our R&D expenses totaled about $900 million this quarter, an increase of 42% on a reconciled basis.

This was driven by an estimated $230 million related to OBS, and continued investment in our R&D pipeline.

Let me now comment on PTP and the OBS acquisition.

First, we're pleased with the way the integration is going.

And we're already seeing positive contributions.

In fact, we estimate that we've already achieved our first year target of about $0.10 of accretion.

Keep in mind, we're integrating these businesses on a global and country basis.

Going forward, we will not be able to separately identify the OBS results.

Finally, let me now provide an update on our PTP program, which includes the OBS integration.

As a quick reminder, this program seeks to reduce and avoid costs, increase productivity, and generate a total of $1.5 billion in targeted annual savings and synergies by the end of 2012.

We anticipate achieving $1.25 billion of this target by 2010.

Keep in mind, PTP includes the original $500 million of integration synergies related to the OBS acquisition.

To date, we've achieved about $100 million in savings, including about $70 million this quarter.

Most of the savings were in SG&A.

In closing, we're pleased with our results this quarter.

Our performance continues to reflect the breadth and depth of our business.

Our broad-based business diversity, coupled with our robust R&D pipeline, position us well to manage the challenges in our business.

With that, I'll turn the call over to Carrie.

Thanks, Bob.

Good afternoon.

Our strategy of building depth and breadth into our portfolio has served us well.

We focused on excellence in execution to maximize performance across our core brands and geographies.

Our US business reflects difficult market dynamics, while our international business continues to perform well, with strong growth in both emerging and established markets.

Our pipeline has many important assets, including near-term opportunities, such as Golimumab, sugammadex, and Asenapine, all currently under regulatory review.

We're very pleased with the continued progress we're making with Remicade, and with our new women's healthcare products.

And many of our brands have expected exclusivity well into the next decade.

Turning to our results for the quarter, sales from our global cholesterol franchise decreased 10% to $1.2 billion.

In the US, sales were down 26%, reflecting the impact of earlier events in the cholesterol market.

During the quarter, total US prescriptions for our cholesterol franchise were down 24% versus the prior year, with pressure on both market share and market growth.

Recent IMS data suggests that 94% of patients switching from Vytorin have moved to a less efficacious product.

Only Vytorin provides more than a 50% LDL cholesterol reduction at the usual starting dose and gets more patients to goal than simvastatin, atorvastatin, and rosuvastatin.

We will continue to remain focused on the many patients who require the LDL cholesterol reduction that Vytorin and Zetia can provide.

We are firmly committed to both brands, and will continue to invest appropriately to further advance patient care.

Cholesterol franchise sales from our international markets increased 37%.

This strong performance reflects continued momentum across the core European markets.

We're pleased with the steady progress we've made with Zetia in Japan since its launch last June.

As you may know, there is a two-week prescribing restriction imposed on all new product introductions in Japan during their first year.

Despite this, Zetia has already captured more than a 5% value share, on par with other major country launches in its first year.

As of July 1st, physicians now have the flexibility to prescribe Zetia more freely to help get patients to their LDL cholesterol goal.

Turning to immunology, Remicade sales increased 41% to $557 million.

With this record quarter, Remicade has now delivered sales of nearly $1.1 billion during the first half of the year, and is currently annualizing past the $2 billion mark.

Remicade continues to be an important growth driver, and represents our growing strength and expertise in biologics.

Despite increasing competition, Remicade has now delivered more than 25% growth in each of the past 10 consecutive quarters.

As new competition has entered the market, overall utilization of biologics continues to increase, particularly in Crohn's Disease and ulcerative colitis.

Anti-TNFs have provided important treatment advances, and we are proud of the pioneering role that Remicade has played in changing the treatment paradigm for these debilitating conditions.

With the potential addition of Golimumab as early as next year, our immunology franchise is well-positioned for long-term growth.

While Remicade may already be perceived as one of the most efficacious products in its category, Golimumab has the potential to be seen as the best subcutaneous injectable with its once a month dosing.

We are very excited about having two products in this large and growing biologic market, with expected exclusivity for Golimumab until 2024.

In allergy, global Nasonex sales increased 6%, driven by solid growth across our international markets.

In the US, Nasonex sales declined 5%, driven by a mild spring allergy season, as well as continued competitive pressures.

Nasonex has now been approved in Japan, representing another important milestone in its life cycle.

We anticipate the Japanese launch this fall.

Sales from our women's healthcare franchise, including fertility and contraception, grew to over $500 million during the quarter.

Nuvaring, Cerazette, and Implanon are important products that provide women more contraceptive options than just the traditional birth control pill.

Earlier this month, we announced promising Phase III results for our next generation fertility treatment.

Patients treated with corifollitropin alfa achieved a 39% pregnancy rate, on par with existing therapies but offering patients the added benefit of less frequent injections.

We're excited about the potential to expand this franchise and the category, helping more couples to become families.

Turning to hepatitis, global Pegintron sales declined 2%, despite continued strong performance in emerging markets.

Final results of the IDEAL study were presented at the annual meeting of the European Association For the Study of the Liver.

Important insights were discussed among physicians that may help shape worldwide clinical practice in treating this serious disease.

Although SVR rates and safety profiles were found to be similar between Pegintron and Pegasys, IDEAL demonstrated predictability of response and lower relapse rates for Pegintron.

We believe healthcare providers and payors may consider these findings to help improve patient outcomes.

Earlier this month, results of a significant Phase III trial with Pegintron in melanoma, the deadliest and most difficult to treat form of skin cancer, were published in The Lancet.

This cooperative group trial was the largest positive adjuvant trial ever conducted in patients with Stage III Melanoma.

Treatment with Pegintron for up to 5 years provided a sustained increase in relapse-free survival, and if approved, Pegintron may provide an important treatment option for physicians and patients in a very challenging disease.

I also want to comment briefly on Sugammadex.

Last month, the EMEA issued a positive opinion for Sugammadex.

By rapidly and safely reversing the effects of shallow and profound muscle relaxation, Sugammadex has the potential to modernize the use of anesthesia around the world.

Sugammadex is a good strategic fit with our current portfolio, leveraging our experience in the hospital channel.

We're looking forward to regulatory action, and hope to bring this novel treatment to anesthesiologists and their patients later this year.

We are taking important steps toward our goal of high performance for the long term.

We continue to execute on our core strategy of driving top line growth, advancing the pipeline, and reducing costs.

We believe our portfolio and geographic diversity positions us well to compete in a dynamic pharmaceutical marketplace.

Now let me turn the call back to Janet.

Thank you, Carrie.

Now we would like to open up the call to Q&A, and I would ask that in order for us to get to as many questions as possible and be able to wrap up our call on time, please limit yourself to one question.

Ellie, you can now start the Q&A.

Thank you.

(OPERATOR INSTRUCTIONS).

We'll pause for just a moment to compile the Q&A roster.

Your first question comes from the line of Tim Anderson from Sanford Bernstein.

Hi, I have a couple of questions on your pipeline which is just the asenapine producer, where are we and what's your confidence level in getting a favorable opinion, what should be near-term, I suppose.

And then Sugammadex, Carrie you just mentioned introducing this product later this year.

PDUFA date is next month, it would seem like you're very close to launching, but your comments seem to suggest it might be a little farther off than something like September.

Am I reading too much into that?

Tim, very good questions.

I can just say that we are very confident in both these products.

We like the profile.

Carrie, you may want to comment on the -- on your understanding of the situation.

Yeah, let me start with the Asenapine first.

I think the potential for that product is very interesting and one that we're quite excited about bringing to market.

We've had experience in this marketplace for many years, and I think during that time, we've seen that this may be considered as one of the most conservative divisions of FDA and it is unusual for them to provide any first cycle approvals.

We are active review with Asenapine right now.

And don't have anything further to report.

Hopefully we will be bringing that one to the market soon.

Looking at Sugammadex, we actually do have a positive opinion from EMEA for Europe, so that's part of why we're hoping to be able to bring it to the market later this year and with FDA the product is under active review.

Thank you.

Next question, please.

Your next question comes from Catherine Arnold of Credit Suisse.

Thanks a lot.

I just wanted to touch on your integration success so far and expense control.

You're obviously up far ahead of your target for the year, and I'm wondering if you could comment as to whether or not that was because you gave us a conservative base case or that you're pleasantly surprised as you've moved through the early days of the integration.

and if it's the latter, maybe you could share those surprises and then also on the same topic, are we seeing expense control in the equity income numbers that you reported this quarter, or is that something that we might see in subsequent quarters?

I'll make a general comment.

I'll ask Bob to make some comments too and Carrie if you want to join in.

Catherine, in general we tend to be careful with our targets because we don't like to do things that might hurt the long-term success of the business.

But I'm -- I can tell you very sincerely, that I am very pleased that we have made very strong progress in a very systematic manner on our PTP project.

We did what we said we would do in April.

We went first to the senior management groups and then we are now looking at the broader picture and we are reducing costs, but most importantly, we are reducing costs across the company.

Everybody is making their contribution, and also most importantly, people are doing it with a certain spirit of really feeling that they belong to a company that has a strong future, and also, we are doing it in a very careful manner so that the business does not get hurt.

We are really making very good choices and doing it very well.

I am very proud of our team.

Bob, any comments?

I think you hit it.

A couple of other points, Catherine.

We're very pleased when we announced the deal we put a hiring freeze in place.

We're seeing benefits from that.

We also tackled procurement early on.

I think those are two factors that are coming through.

Your comment with respect to equity income, we are seeing some level of savings in promotion in the JV.

I would pass that comment on to you.

Carrie, any comments?

I would just take this opportunity to thank our people from around the world for the energy they have engaged with this process and it's really a credit to everyone that we've seen, expense savings coming from all across the company, and a real good spirit of cost savings.

Catherine, in summary, these were targets that we believed were very doable and we are ahead of plan at this stage.

Next question, please.

Mr.

Schott, your line is open.

Great.

Thank you.

This is, Chris Schott at JPMorgan.

Quick question with regards -- I know you're still digesting results on SEAS.

How do you intend to handle questions on cancer risks associated with Vytorin.

I know the call today, you provided a pretty fair view of the signal.

Was interested how you'll handle those coming in and second on the same issue, timing of when you feel you'll have a better sense of if there is going to be an impact with SEAS, kind of what type of time frame would you expect to be able to kind of better update on that.

Thanks.

We will really do a good job and by the way, congratulations on your new job, Chris.

Thank you.

And good luck.

Yes.

But I really think doctors know about certain trials that have occurred out there.

We've read about them for the last several years.

As you know, bioscience is very unpredictable.

It's not as predictable as physical sciences.

When you do a lot of trials, and you heard that during the conference call, you do get the deviant observations.

And you did hear very clearly from Sir Richard Pedo, who is a world renowned cancer epidemiologist, in fact, the science of metanalysis in the use of medical -- in the practice of medicine, in some ways, have been strongly associated with him as a pioneer, and he said it very clearly, that this does not provide credible evidence of any adverse effect on cancer.

So we do hope as the science keeps going forward, things will keep coming forward.

But there was a lot of confidence expressed by the leaders that you heard today, this afternoon.

Next question, please.

Your next question comes from Steve Scala of Cowen.

Can you clarify, is the $64 million from Merck in or out of the $0.45, and secondly, I'm wondering if you know the results of the SANDS subset analysis and if so, can you reassure us that it's not going to generate concern for Zetia?

Thank you.

So Bob, first, you may want to answer and then we'll ask Carrie if she knows anything about the SANDS situation.

Bob?

Thanks, Steve.

Steve, the $64 million is not in the $0.45 of income.

And the SANDS analysis, as we all know, was intriguing because the LDL levels went down quite a bit and as you heard from the speaker this afternoon, it's hard to get the LDL levels down with just titrating the statins up because then you get other issues.

But at this point, I think I'm speaking for Carrie that we really do not know what the situation is with the publication or any more subanalyses.

Am I right, Carrie?

We don't know anything further about SANDS but we hope that it will be published soon.

Next question, please.

Your next question comes from David Moskowitz of Caris and Company.

Thanks, good afternoon.

Just a couple questions on the P&L.

I might have missed this.

Did you talk about the specific synergies that were gained in the second quarter?

And if so, could you quantify that, and also quantify how much of that was related to Zetia, Vytorin, the cholesterol JV cost reductions.

And the other question I have relates to R&D and the trend for the rest of the year.

Looks like you guys are tracking right around $900 million in the quarter.

Can you talk about what you would expect the next two quarters to look like on a run rate basis?

Thanks.

Very good questions.

Bob?

Okay, David.

So the total savings year-to-date was about $100 million.

The savings from PTP and synergies.

$70 million roughly came in this quarter.

So about $70 million came in this quarter, and then with respect to R&D, generally as our pipeline matures we would expect R&D to increase in the back half versus the front half.

Thank you.

Next question, please.

Your next question comes from Seamus Fernandez of Leerink Swann.

Thanks very much.

I was just wondering if Carrie could reiterate what her -- what she commented on with regard to Sugammadex in the United States versus Europe.

I think I missed that.

But it sounded to me like the expectations for Sugammadex in the United States may not be included this year.

With regard to Asenapine, you say that you're hopeful about a review and the duration of that review, but that we should expect the committee to be or this group to be conservative.

I guess I found those comments a little bit confusing as to what we should be thinking about that.

So maybe you could help us think about that a little bit more.

And then just separately on PTP and the thought process around the combined company, as I look at my longer term model, this question is really more for Bob.

Just wondering, as we look across the industry and compare it to other companies in the industry, the 31 to 32% SG&A rate that maybe you could achieve with the incremental $1.5 billion in cost savings seems like it might actually be low and that you might be able to do more than that.

What are the hopes that you could actually generate more cost savings given the fact that your competitors are also moving aggressively on those targets as well.

First Carrie, then Bob.

Seamus, to reiterate what I said before, Sugammadex has already received a positive opinion from EMEA.

So we expect that we could be able to look forward to a launch later this year in Europe.

In the US, it's under regulatory review.

And regarding Asenapine, my comments there really reflect my own experience of 25 years now working in the CNS field, where we've seen repeatedly that that particular division of FDA does not tend to give first cycle approval.

They seem to be one of the more conservative groups.

So while Asenapine is under review at this time, I wonder if we'll see a first cycle review out of a group that typically does not do that.

We are very optimistic about the profile of the product and bringing it to market.

But it's difficult to say at this point exactly when it would be.

The answer is on Asenapine we feel good about our product.

We are not -- we cannot say much about the timing.

Given the past history here.

And Bob, on the second part?

Quickly, on PTP, our teams are focused.

They're focused hard on achieving our $1.5 billion target and I would say we are pleased with the leverage we are seeing in the business in the first half of this year and we are going to work hard to do as much as we can.

As I said to the earlier question, we are pleased and pleasantly surprised that we are able to make so much progress with PTP, taking costs out of the system, getting the teamwork around the world, people making their contributions.

If we believe that there is another time for us to change our numbers, we will certainly do so.

At this point, we're just going faster than we had expected.

Next question, please.

Your next question comes from Tony Butler of Lehman Brothers.

Tony?

Thanks very much.

A non-pharma question.

I've been impressed with the diversity that Organon brings with respect to its Animal Health franchise.

I seem to recall that under the Akzo Nobel umbrella, part of the operating margin opportunity that they were trying to shoulder was something in excess of 20% out of that business.

I'm just curious, Bob, if you could provide some information that supportswthat kind of target for the Animal Health business is either already there and perhaps there's even more that can be achieved into throughout this PTP process in that subdivision of your organization.

Thank you, Tony.

We're very pleased with the Animal Health business.

The vaccine business is very diverse and from a profit standpoint, I think we like to see operating targets north of 20% in that business.

Tony, we do care about margins and we also care about growth.

In this case, because we are R&D intensive with Animal Health, we actually do enjoy a strong opportunity here to keep going with very good margins.

And we probably only have time for one or two more questions.

So next question, please.

Your next question comes from Roopesh Patel of UBS.

Thank you.

Just a couple of questions.

First, on the SEAS trial, has the FDA seen the results that were presented today and have they given you any initial feedback?

I'm just wondering as to when you expect them to complete their overall review on this.

Separately on TRA, is the initiative to partner the drugs still on the table and if so, if you could kindly discuss the progress towards that.

Thanks.

I will first answer the TRA.

We are still looking at the opportunity to partner our drug.

At the same time, as I have said before, it does look a little difficult with getting the right quids, but there is tremendous interest in TRA and we are also feeling very, very good, very good about our own situation, so if we don't get the right partner, we will definitely go on our own, because we have the horsepower and the enthusiasm to get the job done.

The SEAS results are with the FDA.

There might be more submissions and we're making normal progress.

You heard in the call this afternoon, directly from the independent investigators, that they have directly filed their reports also with the authorities.

And we also have done the same in the EU and in other countries and as you also heard on the ENHANCE situation, that is also under review at the FDA and there does not seem to be any particular accelerated schedule.

And last question, please.

Your final question comes from Burt Hazlett of BMO Capital Markets.

Hi, [Jim Tumbrink] here with Burt.

I know the SEAS study may be the topic of the day but there's also been some discussion lately about a failed Lipitor CIMT study.

Wonder if you could comment on that and any implications for ENHANCE.

Thanks.

So our understanding, Carrie, why don't you try to answer that question.

The CASHMERE study was interesting in the sense that it also demonstrated the complex testify these trials and we believe that it is another way to understand how long it can take to be able to provide the data to the public.

It's interesting to see that it's another failed trial and it may raise the question as to whether or not this unproven surrogate end point is in fact a viable option for studies going forward.

We also think in the case of statin-depleted populations or statin-treated populations that you find that pretreatment and aggressive treatment of LDL as should be done, may, again, affect these populations for future study.

Our focus continues to be on the many patients out there who do need aggressive LDL lowering and will really benefit from the products that we bring to the market, since they are the best at providing options for lowering LDL cholesterol.

So I think we are at the end now.

We are very encouraged by the overall situation in our company.

Pleased with the second quarter results, and very pleased with the contribution of OBS.

This was not an easy situation, and we're pleased that the acquisition is coming through very well.

We're encouraged by the update that's coming out of SEAS.

We're also making steady progress with our PTP program, and we feel that our strength and diversity as we look at the very tough environment that faces our industry today, this strength and diversity does give us a very special edge.

Thank you very much for listening in.

This concludes today's conference call.

You may now disconnect.