Merck Profit Rises 12%,
Aided by Singulair, Gardasil
By SARA LEITCH and JOSEE ROSE
July 23, 2007 10:08 a.m. [WSJ]
Merck & Co.'s second-quarter net income rose 12%, as results continued to be boosted by allergy drug Singulair and the new cervical-cancer drug Gardasil.
The Whitehouse Station, N.J., drug maker raised its 2007 earnings outlook, after several quarters of double-digit declines in profit.
Merck said it now expects 2007 earnings of $2.80 to $2.95 a share, or $3 to $3.10 a share excluding restructuring charges. In April, the company had forecast earnings of $2.60 to $2.75 a share, or $2.75 to $2.85 a share excluding charges.
The company is in the midst of a turnaround, as it implements cost-cutting efforts such as job cuts, as it deals with lost exclusivity on cholesterol drug Zocor and continued Vioxx litigation.
Merck said second-quarter net income rose to $1.68 billion, or 77 cents a share, from $1.5 billion, or 69 cents a share, a year earlier. Excluding restructuring and other charges, earnings rose to 82 cents a share from 73 cents a share a year ago, exceeding the company's earlier forecast of 67 cents to 71 cents a share.
Total revenue rose 5.9% to $6.11 billion from $5.77 billion a year ago.
On average, analysts polled by Thomson Financial expected earnings of 72 cents a share on revenue of $5.77 billion. Analyst earnings forecasts typically exclude items.
Merck's Singulair had sales of $1.1 billion, up 15%, and sales of blood-pressure drugs Cozaar and Hyzaar rose to $847 million. These two drugs account for about a third of Merck's revenue. Gardasil also performed well, with sales of $358 million, while Merck's new diabetes drug, Januvia had total sales of $144 million.
Merck's quarterly performance was also helped by its joint venture with Schering-Plough Corp. that markets the popular cholesterol drugs Vytorin and Zetia. Sales of these drugs rose to $1.3 billion, up 30% from a year earlier; profit from this joint venture is recorded under equity income.
The sales of these products helped offset the continuing decline of Zocor, which had been Merck's best-selling product before it lost market exclusivity last year and cheaper, generic drugs cut into sales.
The company said it expects 2007 sales of Singular to reach $4 billion to $4.3 billion, sales of Cozaar and Hyzaar of $3.2 billion to $3.5 billion, and vaccine sales of $3.9 billion to $4.3 billion.
Merck has taken steps to boost its bottom line, including implementing price increases at the beginning of the year on several of its most popular products, and cutting jobs and closing plants -- moves designed to save the company $4 billion to $5 billion through 2010. During the quarter, research and development spending fell 12%. The second quarter of 2006 included $296 million for acquired research from Merck's purchase of GlycoFi.
Regarding Vioxx, Merck -- facing 26,950 suits over its discontinued arthritis drug -- raised its reserve for legal defense costs by $210 million to a total of $810 million.
The company spent $137 million for legal defense costs in the second quarter. Merck withdrew Vioxx from the market in 2004 after a study linked it to a higher risk for heart attacks and strokes.
On average, analysts expect third-quarter earnings of 73 cents a share and full-year earnings of $2.94 a share.
In recent pre-market trading, Merck shares were up $1.98, or 4%, at $51.
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