Merck's Outlook Falls
Short of Expectations
By DONNA KARDOS
December 4, 2007 9:54 a.m.
Merck & Co. issued an initial earnings outlook for 2008 that falls short of analysts' expectations, as the pharmaceutical company will have to deal with generic competition for its blockbuster osteoporosis drug.
In addition, the company disclosed a planned $670 million pretax charge in the fourth quarter to settle federal and state claims that the company overcharged Medicaid for prescription medicines. That will be partially offset by a $450 million gain from insurance proceeds related to the Vioxx liability litigation.
Merck, Whitehouse Station, N.J., said it expects 2008 earnings of $3.28 to $3.38 a share, excluding items. The mean estimate of analysts polled by Thomson Financial pegs 2008 per-share earnings at $3.39. For 2008, Merck said it expects a $100 million pretax charge associated with its global restructuring, and a $2.5 billion minimum gain associated with its AstraZeneca PLC limited partnership.
Fosamax, which will face generic competition in the U.S. starting in February, is projected to have 2008 sales of $1.1 billion to $1.4 billion, compared with 2007's expected $2.9 billion to $3.1 billion.
The company expects 2008 world-wide sales to be driven by its Singulair respiratory products, Cozaar/Hyzaar hypertension products, and vaccines. World-wide sales are still projected to grow at a 4% to 6% annual rate through 2010. Merck also expects continued growth in newer franchises, including the ongoing global launches of cervical cancer vaccine Gardasil, diabetes treatments Januvia and Janumet.
Gross margin next year is projected to be 77% to 78%.
Merck plans to continue its stock-buyback program in 2008. As of Nov. 30, $5.7 billion remained under the current buyback authorizations approved by Merck's board.
Merck also reiterated its 2007 earnings outlook of $3.08 to $3.14 a share, excluding items.
As part of a global restructuring program announced in November 2005, Merck remains on track to eliminate 7,000 positions by the end of 2008. Since the inception of the program through Sept. 30, the company has eliminated about 6,000 positions. |
