Strong sales of cholesterol drugs helped Schering-Plough post a twofold increase in quarterly profit this week, but earnings may expose an over-reliance on Vytorin and Zetia.

John Boris, an analyst with Bear Stearns, said Schering-Plough needs to lower its dependence on the cholesterol joint venture, which contributes 78% of its pretax profits. Boris expects that number to decrease to 71% in 2010 as the company absorbs sales of products from Organon BioSciences, the biotech firm it acquired earlier this year. “Another deal is needed to further diversify,” Boris wrote.

Sales of Vytorin and Zetia rose to $1.3 billion in the quarter, up 34% from a year earlier. They continue to gain share, despite the introduction of generic Zocor (simvastatin) from multiple sources late last year. Pfizer's Lipitor, meanwhile, the best-selling LDL-cholesterol lowering drug, is losing share.

Zetia and Vytorin are indicated for second-line treatment and tend to be used after failure of other medications, most often generic simvastatin. “Generally simvastatin will not get patients to their target goal. So we see very good uptake of Zetia being added on to existing therapy or patients being switched to Vytorin,” Carrie Cox, Schering-Plough EVP, president, global pharmaceuticals, said during Schering-Plough's second-quarter earnings call, according to a transcript from Thomson Street Events.

Vytorin has also benefited from a shift in clinical practice toward more aggressive LDL management, Cox said.

But the growth rate for the cholesterol JV is already decelerating, albeit modestly. Vytorin sales increased 38% to $686 million in the second quarter, a slower growth rate than in the first quarter and in 2006, according to The Wall Street Journal. Schering-Plough CEO Fred Hassan told the Journal he had anticipated some “moderation” as the two products become established in the market.

And Schering-plough faces growing competition to other key products, allergy drug Nasonex, arthritis treatment Remicade and hepatitis C drugs like Peg-Intron, a factor that dampens the outlook for its stock price, said Boris.

Schering-Plough's partner in the cholesterol JV, Merck, is more diversified, with other blockbusters in its portfolio, namely rhinitis treatment Singulair and antihypertensives Cozaar and Hyzaar. Merck also has more affiliates. Equity income, which reflects income from partnerships and alliances, totaled $759 million in the second quarter, the company said. Of that, the cholesterol partnership contributed $465 million, a 45% increase over the prior year. The balance of equity income comes from other joint ventures, including Merial, Sanofi Pasteur MSD and Johnson & Johnson Merck.