8-KRegulation FD

EIDP, Inc. 8-K Report, Regulation FD Disclosure (Apr 24, 2007)

Filed April 24, 2007For Securities:CTA-PBCTA-PA

Summary

E. I. du Pont de Nemours and Company (DuPont) filed an 8-K on April 24, 2007, to disclose information regarding its first-quarter 2007 earnings and to provide important forward-looking guidance on income derived from Cozaar® and Hyzaar® under an agreement with Merck & Co., Inc. The company reported a 15% earnings growth for Q1 2007 and reaffirmed its full-year outlook, indicating a strong start to the year. The primary focus of this filing for investors is the detailed explanation of expected future income from the collaboration on Cozaar® and Hyzaar®. DuPont expects a significant step-down in this income starting in 2010 as patents and exclusivity expire, with a continued annual decline until the worldwide agreement concludes after 2013. This signals a predictable decline in revenue from these key products, typical for the pharmaceutical industry as drugs go off-patent.

Key Highlights

  • 1DuPont reported a 15% earnings growth for the first quarter of 2007.
  • 2The company reaffirmed its full-year financial outlook.
  • 3Guidance was provided on income from Cozaar® and Hyzaar® via collaboration with Merck & Co., Inc.
  • 4Income from these drugs consists of royalties on net sales and a share of profits.
  • 5U.S. exclusivity for Cozaar® is set to end in April 2010.
  • 6The worldwide agreement with Merck is expected to terminate after 2013.
  • 7Investors should anticipate a significant step-down in income from Cozaar® and Hyzaar® starting in 2010, with continued annual declines thereafter.

Frequently Asked Questions

This 8-K filing is primarily to report DuPont's first-quarter 2007 earnings, confirm its full-year financial outlook, and provide crucial forward-looking guidance regarding the expected decline in income from the Cozaar® and Hyzaar® collaboration with Merck & Co., Inc. due to impending patent and exclusivity expirations.

DuPont has guided that the first significant step-down in income from Cozaar® and Hyzaar® is expected to occur in 2010, coinciding with the end of U.S. exclusivity for Cozaar®. Following 2010, the income is expected to continue stepping down annually until the worldwide agreement concludes after 2013.

The decline in income will be driven by the expiration of patents and exclusivity periods for Cozaar® and Hyzaar®. As these protections expire, generic competition typically emerges, leading to reduced sales and profit sharing for the collaborating companies.

No, DuPont states that it cannot predict the exact magnitude of the earnings step-down in each year. However, the general expectation is a traditional sales and earnings decline for a drug once its patent protection expires in the pharmaceutical industry.