S&P: Schering unaffected

Standard & Poor's said the announcement by Schering AG (A/stable/A-1) that it intends to buy the full rights to the production process of multiple sclerosis drug Betaferon from Chiron Corp. (BBB+/positive watch) does not affect the ratings on the company. Despite the related cash outflow, S&P said the group should more than sustain pension- and lease-adjusted funds from operations to net debt of 50%.

The agency said it believes that the transaction will marginally enhance the group's strong business profile, as Schering currently pays an annual fee of $180 million in royalties to Chiron for Betaferon, the patent for which will expire in 2008, and the drug accounted for about 16% of the Schering group's overall sales in 2005.

Furthermore, the acquisition and the announcement of a €500 million share buyback are supported by Schering's excess liquidity and very conservative financial policy, S&P said. After a reported increase in operating earnings of 21% in 2005, the group is focusing on further restructuring following a series of delays in its product pipeline.

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