Maker of Claritin to Cut Costs, Dividend

Schering-Plough Corp., the maker of Claritin allergy pills and other drugs, said Thursday that it would slash its dividend by 68% to conserve cash as it coped with declining sales and government investigations.

The move was another blow to the image of the drug sector on Wall Street, where the stocks had been investor favorites for most of the 1980s and 1990s.

In recent years the big drug firms have been hit by rising generic drug competition, accounting problems and other woes that have hurt their shares.

Schering-Plough Chief Executive Fred Hassan, who took over in April, said Thursday that the company needed money to develop new products as sales of Claritin tumbled amid competition from generic versions.

But Hassan skipped the company’s conference call with analysts late Thursday, angering some. Schering-Plough said he had a “prior commitment.”

The quarterly dividend is being cut to 5.5 cents a share from 17 cents, the Kenilworth, N.J.-based firm said. It also plans to cut 1,000 jobs through early retirement, sell a jet and eliminate employee profit sharing.

“The company’s been in denial for two years,” said Jon Fisher, an analyst at Cincinnati-based Fifth Third Bank, which holds 1 million shares. “They’ve been maintaining this false pretense about what earnings could be when any logical person could look at their situation and see that Claritin, their main product, is being destroyed.”

Second-quarter sales of Claritin dropped 86% from a year earlier, to $112 million. On Thursday, Schering-Plough said its earnings per share in the second half probably would be lower than in the first half and that per-share profit in 2004 probably would trail this year’s results.

In addition to its troubles with Claritin, the company is the subject of government investigations into its pricing, manufacturing and marketing practices.

Schering-Plough made its announcement after markets closed. The stock was up 24 cents to $16.48 on the New York Stock Exchange before the news, but is down 26% year to date.

A Standard & Poor’s index of 12 major drug stocks is down 2.4% this year, while the broad S&P; 500 index is up 14%.