Schering-Plough to cut costs by $1.5 billion a year

NEW YORK (Reuters) - Schering-Plough Corp (SGP.N), reeling from calls for dramatically reduced use of its top-selling cholesterol medicines, on Wednesday announced a cost-cutting program aimed at saving $1.5 billion a year.

"Our first actions will be to execute reductions in high overhead cost areas, beginning with reductions in higher management levels in the company's headquarters and elsewhere," Chief Executive Fred Hassan said in a statement.

Schering said the program responds to dramatically intensifying pressures on the pharmaceutical industry, especially new pressures in the United States, and also to the confusion in the U.S. market around the cholesterol-lowering drugs Vytorin and Zetia that the company sells through a joint venture with Merck & Co (MRK.N).

"Savings and productivity improvements will be realized across the company and around the world. No area will be exempt," Hassan said.

However, he cautioned, "We will not engage in across-the-board cost cutting. We will avoid unwise short-term actions."

Schering-Plough shares are down about 50 percent this year and fell dramatically on Monday after doctors at a major medical meeting urged patients to try older cholesterol drugs before turning to Zetia and Vytorin.

One prominent cardiologist said the drugs should be used only as a last resort.

Among the world's most prescribed, the drugs had annual sales of about $5 billion and account for the majority of Schering-Plough profits. Merck, with a wider portfolio of products, is less dependent on Vytorin sales than Schering, but its shares have also been punished.

Sales and new prescriptions of the drugs have been falling since January, when results of a small, but controversial study were released that showed Vytorin failed to work any better at reversing heart disease than Merck's older cholesterol drug Zocor, which is now available in cheaper generic form as simvastatin. Vytorin combines Zetia and Zocor.

The study was released in full on Sunday at a heart meeting in Chicago. But company and investor hopes that concerns would wane with a discussion of the medicine's success at lowering LDL, or "bad", cholesterol were instead dashed by suggestions that their use be curtailed.

"This confusion, in the absence of an open and balanced scientific discussion of this clinical trial, have caused an unwarranted concern among millions of patients who need to get to their cholesterol goals," Hassan said.

"These products are very good. They basically do what they were designed to do," he said in a conference call with analysts.

At least $1.25 billion, or more than 80 percent, of the planned savings are targeted to be accomplished by the end of 2010, with the balance achieved by 2012, the company said.

Among the cost-cutting measures being undertaken, the company said it will reduce its number of plants globally and cut its sales and marketing and research and development spending.

(Reporting by Bill Berkrot; Editing by Gary Hill and Gunna Dickson)