Schering-Plough Corporation Q2 2009 Earnings Call Transcript

Schering-Plough Corporation (SGP)

Q2 2009 Earnings Call

July 21, 2009 7:45 am ET

Executives

Janet M. Barth - Vice President of Investor Relations

Fred Hassan - Chairman of the Board and Chief Executive Officer

Thomas P. Koestler - Executive Vice President and President, Schering-Plough Research Institute

Robert J. Bertolini - Executive Vice President and Chief Financial Officer

Carrie S. Cox - Executive Vice President and President, Global Pharmaceuticals

Raul E. Kohan - President of Intervet and Schering-Plough Animal Health

Analysts

Tim Anderson - Sanford Bernstein

Chris Schott - J.P. Morgan

Jami Rubin - Goldman Sachs

Anthony Butler - Barclays Capital

Seamus Fernandez - Leerink Swann LLC

Catherine Arnold - Credit Suisse

Steve Scala - Cowen and Company

Presentation

Operator

Good morning. My name is [Carmen] and I will be your conference operator today. At this time I would like to welcome everyone to the Schering-Plough second quarter earnings conference call. (Operator Instructions)

I will now turn the call over to Janet Barth. Ma'am, you may begin.

Janet M. Barth

Thank you, Carmen, and good morning, everyone. Thank you for joining us to review our 2009 second quarter results.

Before we begin, I'd like to note that some of the comments made today may contain forward-looking statements about Schering-Plough's business and prospects. As you know, our actual results may differ materially from these forward-looking statements. Schering-Plough does not assume the obligation to update any forward-looking statement. Please refer to our Securities and Exchange Commission filings, including Item 1A, Risk Factors, in the company's 2009 first quarter 10-Q for additional information about the things that could cause our actual results to differ from our forward-looking statements. The company's SEC filings, as well as today's earnings release and tables, are available on the web at Schering-Plough.com.

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-U.S. 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 website.

This morning I'm joined by Fred Hassan, our Chairman and Chief Executive Officer, Bob Bertolini, our Chief Financial Officer, Carrie Cox, the head of Global Pharmaceuticals, and Tom Koestler, the head of Schering-Plough Research Institute. We also have other members of management available for Q&A.

Now I'd like to introduce Fred Hassan.

Fred Hassan

Thank you, Janet, and good morning, everyone and thank you for joining us. This morning I'll comment on the key drivers of our performance through the second quarter and our focus going forward. During my comments I'll be joined by Tom Koestler, who will provide a brief update on a strong R&D pipeline.

You will have seen from our press release that we again had a good quarter in a very tough environment. We delivered operational sales growth in the quarter. We also delivered reconciled EPS growth. We achieved this performance in the face of several big challenges - number one, the continuing severe global recession; number two, strong currency headwinds; number three, tough comparisons on our cholesterol joint venture sales. In spite of all of these challenges, our people powered through. We continued to grow the top line, we continued to grow the pipeline, and we continued to reduce costs while investing wisely.

Our focus over the past six years on building diversity in our business has created special strength and resilience. This diversity is serving us well in very tough conditions. We achieved operational growth on a broad front around the world. This reflected the strength of our product diversity with growth led by products including REMICADE, NASONEX, TEMODAR, and NUVARING.

In the U.S. and other markets, we're gaining traction with our global women's health franchise. We're also benefiting from the geographic diversity that we've built. For example, we drove solid double-digit operational sales growth in markets such as Russia and China during the second quarter.

To grow on such a broad front during a severe global recession is a great accomplishment. Meantime, six years of focus and investment in our R&D pipeline has created enormous long-term value. Our rich late-stage pipeline has continued to advance, including all the five stars we singled out at our R&D day last November. It's exciting to see the value of our pipeline coming through.

As I mentioned earlier, Tom Koestler is here this morning to give us some perspective. Tom?

Thomas P. Koestler

Thank you, Fred, and good morning. I'm happy to give a brief update on our advancing late-stage pipeline.

So far this year we have already achieved many of the milestones we had communicated at our R&D meeting last November. Let's start with our five stars. First, our thrombin receptor antagonist, TRA, SIMPONI, SAPHRIS, boceprevir, and BRIDION.

Enrollment in our Phase III TRA program continues to ramp up and we have currently more than 27,000 patients enrolled. TRA is our first and best in class power one inhibitor for the treatment of acute coronary syndrome and the prevention of secondary cardiovascular events. There's been a lot of enthusiasm for TRA in the clinical community. In fact, the TIMI 50 study in secondary prevention is now both the largest and most rapidly enrolling trial in the 26-year history of the TIMI Group from Boston. Despite our recent increase in the trial size, we remain on track, with our aspirational filing target of 2010 to 2011.

We have also made good progress with SIMPONI, the first once-monthly anti-TNF treatment for rheumatroid arthritis, ankylosing spondylitis and psoriatic arthritis. In April we received our first approval in Canada, followed by an EMEA-positive opinion in June. SIMPONI is now launched in Canada and we expect to launch in Europe later this year.

Moving to SAPHRIS or asenapine, in November we projected an EU filing in 2009. Last month we announced the EMEA acceptance of our submission, which included data from more than 3,000 patients in our bipolar mania and schizophrenia clinical trials as well as data from the successful relapse prevention trial. In the U.S. we responded to an FDA complete response letter for staffers in February and continue to work towards approval. We are currently working on finalizing the label with FDA. SAPHRIS will be reviewed in an upcoming meeting of the FDA's Psychopharmacologic Drugs Advisory Committee on July 30th.

Next is boceprevir, our potential first and best in class Hepatitis C protease inhibitor currently in Phase III. Our program is fully enrolled and expected to complete in mid-2010. We presented the final results of the Phase II treatment study at [Easel] in April. In this study, patients who received a lead-in regimen with PEGINTRON and REBETOL in combination with boceprevir for 48 weeks achieved a 75% sustained virologic response rate. Now that's nearly double the rate from the control group. That means that in just 15 years we've advanced the treatment paradigm from an SVR of approximately 2% to an SVR of 75% in the Phase II SPRINT-1 study. This is a testament to the hard work and innovation of our R&D team here at Schering-Plough.

The fifth star is BRIDION or sugammadex, which we continue to advance via regulatory approvals in various countries outside the U.S. We now have 34 country approvals to date. In the U.S. we still await FDA feedback on our study proposal and healthy volunteers.

In addition to the five stars, our strong late-stage pipeline has also progressed. For MFF or DULERA, we're on track with the registration process for the U.S. and EU in 2009. By bringing together two key treatments for respiratory disease, we believe this can be a best in class opportunity.

The Phase II and III studies for vicriviroc, our potential best in class CCR5 inhibitor, for the treatment of HIV are now fully enrolled and ongoing. We've projected a regulatory filing in 2009 to 2010 and we remain on track. Our plans to initiate a rolling NDA later this year has been agreed to by the FDA.

In May we initiated patient enrollment in the RED-CABG Phase III trial for acadesine, our potential first in class adenosine regulating agent for heart bypass surgery.

We're also on track for a 2009 U.S. filing for NOMAC E-2, an oral contraceptive that combines a selective progestin with a natural estrogen.

And later this year we will begin a Phase III study for preladenant, our novel first and best in class adenosine 2A receptor antagonist for the treatment of Parkinson's Disease. In fact, in June we presented the Phase II results, showing that preladenant reduced the off time and increased on-time as an add-on therapy to standard treatments, including L-DOPA or dopamine agonists. preladenant could be the first major and modern non-dopaminergic therapy available for patients to treat the key motor symptoms of Parkinson's Disease.

I'd also like to make some comments on our success in Japan, where our executional excellence and strong R&D engine has helped produce a steady flow of new products. With the recent approvals of ASMANEX and REMERON, we have now achieved eight new product approvals in Japan since 2007. It would be difficult for any company to match this track record of success and I'd like to congratulate our team for their dedication and hard work to bring valuable treatments to the patients in Japan.

Another testament to the R&D excellence we have built at Schering-Plough is the FDA fast track designation for six of our products, which include preladenant, vicriviroc, boceprevir, and our next-generation protease inhibitor, NOXAFIL IV, and, of course, our very innovative thrombin receptor antagonist.

We remain focused on driving our R&D pipeline forward and expect our rich late-stage pipeline, combined with the expected exclusivity of many of our key existing products, will give us special strength and great opportunities. We look forward to continuing our progress.

With that I'll hand it back.

Fred Hassan

Thank you, Tom.

So you can see that we have continued to execute in R&D as well efficiently and effectively.

Meantime, our Animal Health unit continued to execute in very difficult environments while keeping up a strong flow of innovation to our customers. Our Consumer Health Care business continues to execute in the face of a difficult consumer environment. We also continue to launch new CHC innovations. Meantime, our PTP program did well around the world. We continued to achieve the improved productivity and the cost reductions that we announced last year.

Let me comment on our Organon BioSciences acquisition. Integration success is measured not just through financial synergies but also by how the combined pipeline progresses and by growth performance in the markets compared to the industry overall. On all these fronts we can see that more than a year and a half later after the close of the OBS acquisition our integration has been a strong success.

So overall we're pleased with how well we're doing in this time of extraordinary challenges in our industry and the global environment. Our special edge continues to be our people. Over the past six years we've built a strong and resilient culture at Schering-Plough, a culture that's intensely focused on executional excellence. In my meetings with our people at many levels around the world I've heard and felt a remarkable winning attitude. Our people are staying engaged and focused on delivering.

Now, just a few comments as we look forward. Along with other companies in our industry, we've been working hard with the U.S. administration and the congressional leaders to make progress on health care reform. It is clear that our industry is a vital player in this effort because our medicines are such an efficient and cost-effective part of the system and because new innovations from our industry will be key to treating the unmet medical needs which pose such huge health and economic threats for the future.

Within our company we will continue to contribute to pre-integration planning with Merck, which is so important to the success of the merge. Above all, we are determined to keep up the relentless focus on driving our business. We will continue to focus on executing with excellence so that we can enter the combined company with strong, positive momentum.

And now I'll turn the call over to Bob Bertolini.

Robert J. Bertolini

Thanks, Fred, and good morning.

As Fred mentioned, we're pleased with our performance in the second quarter, especially in the face of tough global economic conditions and a currency headwind. Despite these challenges, we achieved operational sales growth of 4% and delivered strong earnings of $0.46 per share on a reconciled basis.

For the next few minutes I'd like to review the highlights of our quarterly results, including our sales performance and our operating performance, with an update on the progress of our productivity transformation program.

On a GAAP basis, our second quarter net sales were $4.6 billion, down 6%. This reflects 4% operational growth and an unfavorable impact from currency of 10%.

Based on current exchange rates, we continue to expect foreign currency to be a headwind on the top and bottom line in the third quarter although, based on these rates, we should see this headwind start to dissipate in the fourth quarter.

Within our Global Prescription business sales declined 3% to $3.6 billion in the second quarter. This reflects operational growth of 7% and an unfavorable impact from currency of 10%. On an operational basis, our prescription business grew in all regions, with solid performance from key global brands such as REMICADE, NASONEX, NUVARING and TEMODAR.

Turning to the Cholesterol business, global sales of the cholesterol franchise were $1.1 billion in the second quarter, down 8% compared to the prior year. This reflects an operational decrease of 2% and a 6% unfavorable impact from currency. The operational decline was primarily due to lower sales in the U.S. tempered by 10% operational growth internationally. Sales outside the U.S. benefited from continued growth of ZETIA in Japan. Carrie will talk more about our prescription business in a few moments.

In general we've seen declines in both our Animal Health and Consumer Health Care businesses this quarter. Global sales of Animal Health declined 17%. This reflects an operational decrease of 7% and a 10% unfavorable impact from currency. The operational sales decline was generally due to tough global economic conditions, difficult comparisons due to the prior year launch of our bluetongue vaccine, and an unfavorable impact from divested products in 2008. In spite of the challenges this quarter, we believe in the long-term fundamentals of this business.

In Consumer Health sales in the second quarter declined 5%, primarily due to lower sales of sun care products due to unseasonable weather. In this tough consumer environment, higher sales of MiraLAX helped offset lower sales of OTC Claritin.

Now let me review our operating performance during the second quarter. On a reconciled basis our gross margin was 68.1%, slightly lower than the prior year period. The decrease in the quarter was primarily due to an unfavorable impact from foreign exchange.

Before turning to SG&A I want to briefly review our progress toward achieving our overall $1.5 billion PTP target by 2012. For the first six months of 2009 we achieved more than $650 million of PTP savings, so we're well on track to achieve our annualized target of $1.25 billion by 2010.

SG&A expenses in the second quarter decreased 13% to $1.6 billion, benefiting primarily from favorable currency and PTP actions. Excluding a favorable impact from exchange, SG&A was about 6% lower. Our SG&A ratio improved in the second quarter to about 35%. That's a 300 basis point improvement compared to the prior year period, so it's clear that we're doing a good job controlling our costs.

Moving to R&D, as you just heard from Tom, we continue to advance our pipeline, including our five stars. As you know, R&D spending varies quarter to quarter and is always subject to the timing of clinical trials and related activities. In the second quarter our R&D expenses declined 5% to about $860 million. Excluding a favorable impact from currency, R&D spending was roughly flat.

In closing, our second quarter results reflect strong performance in the face of many of the challenges that Fred described. We're pleased that our people remain focused on executing with excellence and driving our business forward. We remain focused on growing the top line, growing the pipeline and reducing costs while investing wisely.

With that, I'll now turn it over to Carrie.

Carrie S. Cox

Thanks, Bob. Good morning.

Our strong second quarter performance is a testament to the strength that we've built at Schering-Plough. Our colleagues around the world have remained focused on executing with excellence. Our international markets continue to deliver good operational growth. With eight of our top 10 countries growing faster than their respective markets, our strength overseas has been key in sustaining our momentum.

We are particularly pleased with our performance in Japan, where Q2 sales increased 19% ex exchange, with more than 50% of the operational growth coming from new product launches. The recent approvals in Japan of both Remeron and Asmanex can help further transform our product portfolio in Japan. The Japanese markets for depression and asthma are each the second-largest in the world, so we are pleased that these new opportunities position us for further growth. Brands recently launched in Japan, like TEMODAR, ESMERON, ZETIA and NASONEX are also progressing well. NASONEX, for example, has recently reached more than a 20% market share based on IMS data. ZETIA's market share is now at 9%.

Turning to immunology, REMICADE sales increased 19% ex exchange. We continue to see good growth across each of REMICADE's six core indications despite increased competition and are particularly pleased with the strong double-digit growth in ulcerative colitis, psoriasis, and Crohn's Disease. In rheumatoid arthritis, the power and speed of REMICADE provides dramatic efficacy for rapidly progressing patients. In Crohn's Disease and ulcerative colitis REMICADE holds a leading market share position with unmatched efficacy among the anti-TNFs. In psoriasis we believe the dramatic clearance in skin and nails can help drive sustainable growth in this fast-growing segment.

While REMICADE will remain the cornerstone of the immunology franchise, SIMPONI allows us to enter the larger office-based market. We believe SIMPONI has the potential to become first choice among subcutaneous anti-TNF therapies with its competitive efficacy, once-monthly dosing schedule, and specifically designed autoinjector for arthritis patients. With its launch in Canada just a few weeks ago, SIMPONI is now the first and only once-monthly subcutaneous anti-TNF. SIMPONI also took a step closer towards reaching physicians and patients across Europe with last month's positive opinion from the CHMP.

In cholesterol, global franchise sales declined 2% ex exchange to nearly $1.1 billion. We continue to see good operational growth internationally from most established and emerging markets.

I also want to provide some additional perspective on two of our late-stage pipeline products. In neuroscience we are delighted that the EMEA has accepted our marketing application for SAPHRIS or SYCREST, as it will be called in Europe, for the treatment of schizophrenia and bipolar disorder.

In the U.S. we are looking forward to the FDA advisory meeting and are making good progress in bring SAPHRIS to patients and physicians. Our launch plans are advancing nicely and we are in the final stages of building a neuroscience sales team in the U.S.

As one of our five stars, SAPHRIS has the potential to hold a unique space along the treatment continuum because it may combine good efficacy with an attractive metabolic profile. This can be very important in the treatment of chronic diseases, where long-term metabolic impact is a consideration in therapy.

In fertility, we recently announced exciting Phase III results for our first in class stained follicle stimulant, corifollitropin alpha. In this trial, a single injection of corifollitropin achieved similar efficacy to current therapies given once daily for seven days. Offering patients a safe and effective treatment regimen with the added benefit of less-frequent injections is another example of our patient-centered approach in fertility.

In closing, we are very proud of what we continue to accomplish. Our colleagues around the world have remained focused on our customers, our patients and driving our performance.

Thanks, and now let me turn the call back to Janet.

Janet M. Barth

Thank you, Carrie.

At this time, Carmen, I think we're ready to open the call for Q&A. Before we do I'd just like to remind you we would appreciate it if you could limit yourself to one or two questions at a time. Feel free to get back into the queue and if we have time we'll take your additional questions. Thank you.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Tim Anderson - Sanford Bernstein.

Tim Anderson - Sanford Bernstein

Most companies now are reporting their emerging market sales. Can we get the same from Schering?

The second question just relates to your comment on boceprevir being best in class. It seems like that's a tough claim given the prior data and treatment experience patients, so I'm wondering if we're missing something there.

And then on VYTORIN and ZETIA, how are you guys thinking about the pending ARBITER 6 trial result?

Fred Hassan

Okay, so Bob, you'll answer the first question; Tom, you'll answer the second one, and Carrie, you'll answer the third question.

Bob?

Robert J. Bertolini

So, Tim, on emerging markets, it's roughly 10% or 11% of our sales. We characterize that as emerging markets. It'd be markets like China, Russia, Turkey. For the quarter they came in at roughly around $525 million in sales.

Thomas P. Koestler

And, Tim, on boceprevir, we remain pretty positive about boceprevir for a couple of reasons. First of all, achieving that 75% sustained virologic response rate is unsurpassed. It was specifically mentioned - actually, I think you were referring to the null patient population. And in that particular population we demonstrated results around 14%, 12% or 14%. We chose not to pursue that particular interferon-resistant population, I think for the primary reason that with that population you need to be a little careful about exposing those patients to the current regimen of protease inhibitors because one doesn't want to give them - I'll put it just off the situation of mutations - that'll enable you to have a very difficult choice going forward with those patients.

So we remain very bullish on the fact that this is a very good compound. It's very well tolerated. We're not dose limited. And we think our efficacy rates look pretty darn good.

Fred Hassan

And Carrie?

Carrie S. Cox

And on ARBITER 6 let me just add that we've seen no commercial impact.

Fred Hassan

And I think, Tim, on the emerging markets, this has been a long-term strategy. You may remember we had this thing about extending the core into new geographies, and this has been a very sustained strategy that's made a huge difference in our company's growth rate over the last six years.

Operator

Your next question comes from Chris Schott - J.P. Morgan.

Chris Schott - J.P. Morgan

First, on your Animal Health business, just thinking ahead to the second half of the year and beyond, at this point are you seeing any signs that we've reached an inflection point as it relates to the Animal Health business or should we anticipate an increased level of economic impact as the year progresses?

Second, can you elaborate a little bit more on gross margin in the quarter? Sorry if I missed it, but can you just quantify the impact from currency on gross margins in the quarter and remind us again how currency had a negative impact this quarter after that strong benefit we saw in Q1?

And then finally just very quickly, sugammadex. Once you begin your study, how long do you expect it'll take to enroll and run that additional clinical study?

Fred Hassan

So first I'll just comment that Animal Health from a business portfolio point of view is a very good business. We've got about 1,000 products with very little exposure to individual products. It's also an R&D intensive business and also it's a good customer touch business. And we happen to be one of the strongest companies in that area, so this is a very valuable asset for the long term.

Raul, you may comment on the more near-term aspects of the business.

Raul E. Kohan

Thank you, Fred.

As you know, sales decreased 17%, out of which 10% is exchange and 7% was excluding exchange. And the 7%, 100% is explained by the fact that we had divestitures because of the OBS acquisition and also the impact of the launch of the bluetongue vaccine that we had in the second quarter of 2008.

Moving forward, we are very bullish about the market in the longer term and we believe that the market for the second semester of this year, according with the expectation of the FDA and the private outlooks, are that it's going to remain almost flat.

Fred Hassan

Thank you, Raul, and Bob?

Robert J. Bertolini

Yes, Chris, on the gross margin, as I mentioned, on a reconciled basis we came in at 68.1%, slightly lower than last year, and that was pretty much all due to exchange. And the reason it's exchange, to answer your question, it's really as the inventories work through our global networks. So the impact on that was around 160 basis points, so absent that FX impact we would be in the high 69%, [69.5%], in that range, pretty strong and consistent with the first quarter gross margins.

Fred Hassan

So good product improvement. And Tom?

Thomas P. Koestler

Hi, Chris. In terms of sugammadex and the enrollment, as I mentioned, we do expect to hear from FDA very, very soon. And as I reported previously, this will be a normal, healthy volunteer study, so we expect that the enrollment will be quite quick and the duration of the trial more than likely will be no longer than 10 or 12 weeks.

Operator

Your next question comes from Jami Rubin - Goldman Sachs.

Jami Rubin - Goldman Sachs

Just a couple follow up questions. Carrie, you mentioned ARBITER 6, but when are we actually going to see the results?

And secondly, can you discuss, Tom, the issues you expect FDA will focus on at the upcoming asenapine panel meeting?

And thirdly, if you could provide any color, Carrie, around SIMPONI's launch in Canada?

Fred Hassan

Carrie, could you try to answer question one and three, and then we'll go to Tom.

Carrie S. Cox

Okay. Jami, on ARBITER 6 we really don't have any additional information at this point in time.

The SIMPONI launch in Canada is off to a great start. I think it's exciting for us to actually see the first launch of a product that we feel has such great potential, but as always you know the market in Canada; it just takes some time to get the provincial approvals to have reimbursement accepted around the various provinces in the country. There's a substantial private market in Canada in that arena and we're doing very well, growing pretty rapidly there, but it'll probably take a year before you can expect to see what the full potential will be because that's the general reimbursement cycle for some of the big, big provinces.

We're preparing well for launch in Europe and hopefully we'll be able to complete that fairly soon because there's a lot of excitement in countries where we are already such a strong player with REMICADE. You can imagine our people are very excited to have another product to bring forward.

Thomas P. Koestler

Yes, Jami, I'll take two of those. ARBITER 6, first of all, Jami, that's not our trial. I think that's really Abbott and others, and we really have no insight at this point in time.

In terms of the FDA advisory committee for SAPHRIS, it'll be on July 30th; it'll be at the end of the month. And I think it'll be straightforward from the standpoint that two questions will be asked  is it safe and is it effective.

Fred Hassan

Thank you, Jami. And on SIMPONI, Jami, I had a chance to visit with many, many country managers, in fact, all the country managers, with Carrie, and the enthusiasm for SIMPONI is huge across the board, so we feel very good about this product.

Operator

Your next question comes from Anthony Butler - Barclays Capital.

Anthony Butler - Barclays Capital

Carrie, just a follow up. You alluded to building a neuro sales force in the U.S. Could you provide some color around the size and are those new people or are they existing individuals that have been shifted over?

And secondly, has there been an increase in overall cost for the impending launch of SIMPONI in the EU to date?

Carrie S. Cox

We are delighted to be able to have the opportunity to build the neuroscience sales team. And, Tony, you know we don't comment on the exact numbers of reps for competitive reasons, but we did size the sales force to be competitive with other products in the category. It is a market that still has a substantial amount of promotional support and we are building it from within. We do have a number of people in our company who have previous background in the arena with psychiatry sales; obviously, we're looking at those people. But we've had a great opportunity to provide this new and exciting chance to be part of a great launch to our folks across the country, across our sales teams, and we're very excited with the response we're getting and the preparations that we are making towards launch.

For SIMPONI in Europe particularly, again, as I just mentioned, because we are such a strong player with REMICADE, much of the work to prepare for the pre-launch of SIMPONI has been accomplished over the last year or two already, so there hasn't had to be a substantial increase in infrastructure. The great thing about bringing a second product into the immunology franchise is while it lets us go to additional physicians and really into a whole new market segment, it doesn't require much additional infrastructure at all, so it's a very efficient launch, but one that we think is going to have a lot of impact.

Fred Hassan

So SIMPONI not only gives us top line synergy opportunities, it actually gives us a leveraged P&L opportunity.

Operator

Your next question comes from Seamus Fernandez - Leerink Swann LLC.

Seamus Fernandez - Leerink Swann LLC

So just a quick question on the TRA trial. Some reports I guess when the trial was increased in size suggested that the trial would actually be fully enrolled by the end of September of this year, allowing for completion in 2010. I'm just wondering if that timeline is still in place.

And then second, Tom, just wondering if you could give us a little bit more color on what the inclusion in the trial is in terms of - can you give us any color on the percentage of patients that would be on single anti-platelet therapy in the TRA 2P study simply because that obviously would be incorporated in the standard of care as well?

Thomas P. Koestler

Yes, Seamus, in terms of enrollment, we really don't project when we're going to complete the enrollment. We are very, very pleased with the rate of enrollment in both the T2P and the coronary syndrome trial; we're making really, really good progress, so I'm very pleased with that. And we are on track for a 2010 - 2011 filing, so I think at this point that's the best I can provide for you and I think that works.

In terms of your other question about what's the mix in the TRA trial, particularly in the 2P trial, as we've stated over and over again, the trial is enrolling everything on top the standard of care, as you pointed out, and right now I can't give you a breakout of how many patients are on mono therapy, aspirin, or how many patients are on combined therapy with [prasigril], but we expect the vast majority of those patients to be on combination therapy.

Fred Hassan

Since many of you would be wanting to dial into the next call, we're now down to the two last questions.

Operator

Your next question comes from Catherine Arnold - Credit Suisse.

Catherine Arnold - Credit Suisse

I just wanted to ask you if you could give us some insight on when we might hear the transition plans for management for the new company, if you have any sort of stated deadlines on that?

I'm wondering if you could also talk about your primary care sales force push and if you have any opportunities that you see even as a stand-alone company to decrease that push into the primary care setting given the changing balance of power between physicians and insurers?

Fred Hassan

Well, Catherine, I think the best answer to the first question is we're going through a very good integration planning process with Merck. We're working in a very careful and collaborative manner. The real area on the critical path are the antitrust clearances. So the focus is on focusing on our business but at the same time doing a good job on the planning of the integration.

And, Carrie, on the second question?

Carrie S. Cox

Catherine, we had the opportunity about a year ago now to implement a new selling model in the U.S. And while we consider the details of it to be a proprietary advantage, I will tell you that it was I think a very smart strategy in that it already took into account the balance of what a customer's access could be to certain products as well as what their therapeutic need and interest would be for certain products. So we've incorporated into our work today a view of managed care and physician interest, so I think we've done a very nice job there.

And you may well be aware that our U.S. managed care is routinely cited as among the best in the industry and usually wins the awards for top account team as voted by the customers, so I think this is an area we've done extremely well.

We've also had the opportunity to create some new efficiencies and that's also given us the benefit of being able to staff the neuroscience team from within without expecting to have any detrimental impact on our other products because we've created that flexibility in our new model.

Catherine Arnold - Credit Suisse

But are there any specific therapeutic areas that you would say as you look forward, not as to what you've already accomplished, that we might see some opportunity to slim down in the power?

Carrie S. Cox

I think we routinely review promotional needs and models. And while we have a flexible point of view, we do try to focus on the customer, so it's a combination of the customer's interests and managed care access. And obviously that may differ in every town, by physician, by plan, by geography, but we center on the customer and put the customer at the focus.

Fred Hassan

That's a little separate, I think, versus other companies that might focus more on therapeutic areas; we're more focused on the customer and then we try to use that channel for approaching the customer with various therapeutic areas.

And I think we're down to the last question.

Operator

Your final question comes from Steve Scala - Cowen and Company.

Steve Scala - Cowen and Company

I have a follow up on the TRA 2P trial. Were the 1,000 additional patients added because of an unexpectedly low event rate or to reach a conclusion more quickly? And if it was due to a low event rate, what is the new expected event rate versus the 8% previously?

And secondly, on VYTORIN, has the event look at the improvement trial occurred yet, which would imply that half the number of events have occurred in the trial?

Fred Hassan

Very penetrating questions, Tom Koestler.

Thomas P. Koestler

Yes, Steve. The 2P trial we increased enrollment; there's a methodology paper for this and we increased the enrollment because, as you would predict, given the standard of care today it's gotten increasingly and continues to get a little bit better as we approach each calendar year. So as a result of that we had to increase the enrollment. So it's not due to speed; it's just due to the overall enrollment rate. So it's a very simple clinical trial execution to do that.

In terms of improvement, we have not yet reached the midpoint where we would have received 50% of the event rates, so that analysis is still not projected to take place for some time.

Fred Hassan

Thank you, Tom, and now I'd like to make a few closing comments.

Thank you, everyone, for joining us today.

In closing, we're proud of the execution that delivered another strong quarter in such challenging conditions. We continue to see the strength of our diversification strategy and the strength of our advancing late-stage R&D P&L.

Looking forward, we will continue to keep our relentless focus on execution. Again, thank you for joining us this morning.

Operator

Thank you for participating in today's conference. You may now disconnect.

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