Merck Plans to Cut 7,200 More Jobs
Wyeth Posts Flat Results
By MIKE BARRIS
Merck & Co. posted a 28% drop in third-quarter net income on weakness in its cholesterol-drug joint venture as the drug maker reinstated a long-term forecast that it withdrew in July.
Merck also said that it will cut 7,200 jobs by the end of 2011 to lower costs, with 40% of the reductions coming from the U.S. Merck also will cut its number of senior and mid-level executives by about 25%. As of Sept. 30, Merck had about 56,700 employees.
Merck reported net income of $1.09 billion, or 51 cents a share, compared with $1.53 billion, or 70 cents a share, a year earlier. Excluding restructuring charges, earnings rose to 80 cents a share from 75 cents a share.
Sales fell 2.1% to $5.94 billion, or 6.1% excluding the weaker dollar.
Analysts polled by Thomson Reuters forecast earnings, excluding items, of 79 cents a share on revenue of $5.98 billion.
Merck has been in turnaround mode since the 2004 withdrawal of painkiller Vioxx on safety concerns and the 2006 loss of U.S. market exclusivity for cholesterol drug Zocor. It is undergoing a restructuring that aims for $8 billion to $9 billion in total pretax savings.
Cholesterol drugs Merck co-markets with Schering-Plough Corp. have had declining sales this year due to questions surrounding their effectiveness and safety. Combined sales of Vytorin and Zetia dropped 15% to $1.1 billion, with lower U.S. sales partly offset by increased sales outside the U.S.
Sales of Merck's hit cervical-cancer vaccine, Gardasil, dropped 4%. Merck blamed a slowdown in Gardasil sales on deceleration in use by girls and women ages 13 to 18, as well as lower-than-expected use by women ages 19 to 26. Gardasil is approved for use by females ages nine to 26.
Asthma and allergy drug Singulair recorded 1% growth. U.S. sales have been hurt by an over-the-counter version of rival drug Zyrtec by Johnson & Johnson as well as by concerns about the Food and Drug Administration's March alert of a possible association between Singulair and suicide.
Combined sales of anti-hypertension drugs Cozaar and Hyzaar rose 9%. Sales of diabetes drug Januvia doubled and osteoporosis drug Fosamax slumped 51%.
Looking ahead, Merck expects 2008 earnings, excluding items, of $3.28 to $3.32 a share, compared with the forecast of $3.28 to $3.38 a share issued earlier this year before it pulled expectations in July to study impacts of a Vytorin study on results.
It also estimates 2005 to 2010 earnings growth in the mid-to high-single digits, excluding items, on a per-share basis with sales growth of 2% to 4%.
Analysts wanted to see if Merck would reinstate a long-term financial forecast that was reasonably close to the ambitious view Merck backed away from in July amid uncertainty over sales growth for its top products.
In late 2005, when Merck's future was clouded by massive personal-injury litigation over Vioxx, executives unveiled a forecast that called for average annual earnings growth of at least 10%, excluding certain costs, through 2010. Merck seemed on its way to hitting these goals in 2006 and 2007, but in a stunning reversal, it abandoned the long-term outlook in July, halfway through the five-year plan.
Wyeth Posts Flat Results
Meanwhile, Wyeth's third-quarter net income slipped 0.7% as key drugs Enbrel and Prevnar and favorable foreign-exchange rates offset falling sales of its former star heartburn drug, Protonix, amid generic competition.
The drug maker, which has branched out from its core pharmaceutical operations to become a top vaccine developer, also raised the low end of its 2008 earnings estimates.
Net income fell to $1.14 billion from $1.15 billion, while earnings per share were flat at 84 cents. Excluding charges related to the company's cost-cutting initiatives, earnings were flat at 90 cents a share.
Net revenue rose 3.7% to $5.83 billion, with the weak dollar accounting for 1.7 percentage points of the increase.
On average, analysts surveyed by Thomson Reuters had expected earnings of 90 cents a share on revenue of $5.9 billion.
Gross margin rose to 73% from 71.2%.
The maker of Effexor, the world's top-selling antidepressant, Advil pain reliever and Centrum vitamins is banking on a diversified portfolio of prescription drugs and over-the-counter medicines to help mitigate the loss of blockbuster products to generic competition and to buffer earnings volatility.
Chairman and Chief Executive Bernard Poussot said Wyeth now derives 43% of its revenue from vaccines, biotechnology and nutritional products.
In the quarter, sales of antidepressant Effexor rose 3%.
Sales of Protonix, a former blockbuster heartburn drug, plunged 45% as generics came on the market. The company is trying to stop the generics with a patent-infringement suit. Wyeth launched its own generic version of Protonix in the first quarter.
Rheumatoid-arthritis drug Enbrel, which Wyeth co-markets with Amgen Inc., saw sales outside the U.S. and Canada rise 32%.
Sales of Prevnar, Wyeth's vaccine for pneumococcal disease, rose 13%. Wyeth has developed a follow-up to Prevnar that it hopes can further reduce the rates of invasive pneumococcal disease, which can be fatal. Wyeth's hope is the new vaccine -- internally dubbed Prevnar-13 -- would offer broader protection and that its use might eventually be expanded to include older adults. Wyeth plans to submit the experimental vaccine for regulatory approval in the U.S. and Europe early next year.
Looking ahead, Wyeth said it now expects 2008 earnings of $3.49 to $3.55 a share, up from the July-boosted estimate of $3.47 to $3.55. Analysts expect $3.54.
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