Merck Posts 1.7% Profit Rise, Reserves More Funds for Vioxx
By PETER LOFTUS
Staff Reporter of THE WALL STREET JOURNAL
January 31, 2006 5:57 p.m.
Merck & Co. modestly improved fourth-quarter earnings, helped by a gain in sales of its asthma medication and income from its cholesterol-drug partnership with Schering-Plough Corp.
The Whitehouse Station, N.J., pharmaceutical company also said it added $295 million during the fourth quarter to a reserve to cover legal defense costs related to Vioxx, the painkiller Merck withdrew from the market in 2004 after a study showed it elevated the risk of heart attack and stroke in long-term users. It had already set aside $675 million, of which it has spent $285 million over the past year on the litigation. The company has not yet made reserves for damages it may have to pay in the cases, saying it's too early to estimate such costs.
fourth-quarter results were slightly ahead of analysts' expectations, and Merck reiterated its financial forecast for 2006 and its vow to return to profit growth, excluding restructuring costs, in 2007.
Merck Chief Executive Richard Clark attributed the results to "our ability to execute." In an interview, he said "all areas of the company made their revenue targets and their cost targets." He also cited Merck's partnerships with other companies.
The drug maker said net income rose 1.7% to $1.12 billion, or 51 cents a share, from $1.10 billion, or 50 cents a share, a year earlier. Revenue rose to $5.77 billion from $5.75 billion.
The latest quarter included a restructuring charge of 12 cents. Excluding items, earnings were 64 cents a share, two cents ahead of forecast by analysts surveyed by Thomson Financial.
Results were helped by a 12% gain in sales of asthma drug Singulair and income from its cholesterol-drug partnership with Schering-Plough, which sells Vytorin and Zetia.
Merck reiterated its financial forecast for 2006 and its vow to return to profit growth, excluding restructuring costs, in 2007.
But it faces two big obstacles to achieving its long-term growth targets with the impending loss of patent protection for two blockbuster drugs, Zocor for cholesterol this year, and Fosamax for osteoporosis in 2008.
Generic sales outside the U.S. continued to take a bite out of sales of Fosamax and Zocor, which fell 5% and 18% respectively.
Mr. Clark said Merck is in talks with more than 40 companies regarding "potential transactions." He said the company would seek to acquire biotechnology companies that in addition to a promising pipeline also have existing products that could boost its top line.
Merck will try to temporarily soften the blow of Zocor's patent expiration. It has signed an agreement authorizing Dr. Reddy's Laboratories Ltd. of India to distribute generic Zocor, assuming it gets FDA approval for a 180-day exclusivity period following the patent expiration.
Meanwhile, rival drug maker Wyeth recorded a fourth-quarter profit of $731.7 million, or 54 cents a share, compared with a loss of $1.76 billion, or $1.32 a share, a year earlier. Revenue rose 2.1% to $4.75 billion from $4.65 billion.
But results came in below analysts' forecasts as sales of the Madison, New Jersey, company's Effexor depression drug fell while research costs rose sharply. Wyeth's shares of were down $1.19, or 2.5%, at $45.74 in 4.p.m. trading on the New York Stock Exchange, while Merck shares were up 11 cents, or 0.3%, to $34.57.
--Frank Byrt contributed to this article.
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