2nd UPDATE: Merck's 3Q Profit Surges On Gain; Boosts View
October 22 2009 - 11:05AM
Dow Jones News
Merck & Co.'s (MRK) third-quarter profit more than tripled
on a gain from the sale of the drug maker's stake in an
animal-health joint venture, while a continued rebound in a
blockbuster asthma drug helped overall sales inch higher.
Merck shares, however, dropped 46 cents, or 1.4%, to $32.22,
possibly due to investor disappointment that Merck didn't
significantly raise its 2009 earnings forecast despite reporting
higher-than-expected third-quarter earnings.
Earlier Thursday, Merck merger partner Schering-Plough Corp.
(SGP) reported declining sales and profits for the quarter.
Merck is planning to close its purchase of Schering by the end
of the year, in a deal announced in March. Merck made the deal to
help bolster its research pipeline and diversify its product lineup
in the face of challenges such as generic competition and setbacks
in bringing new drugs to market.
Both companies reported a decline in sales for their
cholesterol-drug joint venture, which continues to be under
pressure due to clinical studies last year that raised questions
about the safety and effectiveness of Vytorin and Zetia.
Merck Chief Executive Richard Clark told analysts on a
conference call the company was able to post improved results
despite a challenging economic environment and was focused on
making a smooth close of the Schering purchase.
For the three months ended Sept. 30, Merck reported earnings of
$3.4 billion, or $1.61 a share, up from $1.09 billion, or 51 cents
a share, a year earlier. The latest quarter included a gain of $1.7
billion from Merck's sale of its 50% interest in the Merial
animal-health joint venture to Sanofi-Aventis SA (SNY), which
already owned the other half.
Merck made the deal with Sanofi to clear the way for regulatory
antitrust clearance for the Schering deal, because Schering has its
own animal-health operations. But Merck and Sanofi structured their
deal so that they may effectively re-form Merial as a joint venture
after the Schering deal closes, probably with divestitures
required.
Excluding the gain and other items in both periods, earnings
would have been 90 cents a share in the latest quarter, compared
with 80 cents a share a year earlier and well ahead of the mean
earnings estimate of analysts surveyed by Thomson Reuters of 82
cents a share.
Sales rose 2% to $6.05 billion, ahead of the Thomson estimate,
though negative currency-exchange trends trimmed growth by 3
percentage points. U.S. sales rose 4% while non-U.S. sales were
roughly flat.
Merck's biggest product, allergy and asthma medication
Singulair, saw sales growth of 5% to $1.09 billion, continuing a
rebound that picked up in the second quarter. Last year, sales were
under pressure partly from safety concerns prompted by U.S.
regulatory alerts.
Sales also rose for diabetes drugs Januvia and Janumet, and HIV
drug Isentress. But sales declined for blood-pressure drugs Cozaar
and Hyzaar, and rotavirus vaccine Rotateq.
Merck's cervical-cancer vaccine Gardasil continued to decline,
with sales of $311 million for the quarter, down 22%. Merck has had
difficulty convincing college-age women and those in their 20s to
get the shot, after having brisk success in adolescent girls
following the vaccine's 2006 introduction. Gardasil was recently
approved by the Food and Drug Administration for use in males to
prevent genital warts, but on Wednesday a Centers for Disease
Control advisory committee declined to recommend that males get
routine vaccination. Instead, the committee said males could get
the shot if they and their doctors decide on it.
Ken Frazier, head of Merck's human health unit, said Thursday
that uptake of Gardasil among males would probably be slower than
it has been among females due to the CDC committee's
recommendation.
Merck reported combined sales of cholesterol drugs Vytorin and
Zetia of $1 billion, down 7% from a year earlier. Schering-Plough
reported slightly different figures -- but still a decline --
because it includes sales in regions that aren't part of the joint
venture. Neither company records sales from the venture but results
are reflected elsewhere on their income statements.
Sales of the cholesterol drugs could come under further pressure
next month when a study comparing Zetia with Abbott Laboratories'
(ABT) Niaspan is presented at a major cardiology meeting. The
results aren't yet known, but many doctors and investors suspect
that Niaspan outperformed Zetia in the study. Merck executives
spent some time on the conference call Thursday playing down the
importance of the study -- reinforcing the view that it will be
negative for Zetia.
Merck tightened its 2009 earnings forecast to $3.20 to $3.30 a
share, excluding one-time items, versus a prior forecast of $3.15
to $3.30 a share. When items such as the large animal-health sale
gain are factored in, Merck sees 2009 earnings of $3.69 to $3.89 a
share. Merck reaffirmed its 2009 revenue forecast of $23.2 billion
to $23.7 billion.
-By Peter Loftus, Dow Jones Newswires; 215-656-8289;
peter.loftus@dowjones.com
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