Merck's double-digit growth may see rocky ride
ABN Amro's Keeney: Vioxx sales over $1.3 billion 'difficult'
By Stephanie O'Brien, CBS MarketWatch
Last Update: 4:39 PM ET Apr 26, 1999 Movers & Shakers
WHITEHOUSE STATION, N.J. (CBS.MW) -- Merck & Co. may struggle to maintain double-digit earnings growth next year, an ABN Amro analyst said Monday.
In a note to clients, James Keeney said the U.S.' largest drug maker (MRK: news, msgs) doesn't appear to be maximizing sales of its new drugs.
Keeney also said that Vioxx, a new pain reliever awaiting FDA approval for sale and for which Merck has high hopes, may not be able to generate sales strong enough to boost the company's growth rate significantly.
Last week, the "super aspirin" Vioxx received backing from an advisory panel to the U.S. Food & Drug Administration. The panel voted to approve Vioxx for the treatment of arthritis and for acute pain. The FDA will decide at a later date whether to approve Vioxx for sale.
The drug, from a class of medications known as COX-2 inhibitors, is aimed primarily at treating arthritis, but could treat other types of pain with fewer side effects, such as ulcers and internal bleeding.
Sufferers of pain such as severe menstrual cramps or discomfort following dental or other surgery may have an alternative to prescription forms of non-steroidal anti-inflammatory drugs. Examples of those are naproxen, which is sold over-the-counter as Aleve, and ibuprofen, sold over-the-counter as Advil.
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Earlier this year, the FDA approved a COX-2 inhibitor manufactured and marketed by Monsanto Co.'s (MTC: news, msgs) G.D. Searle unit and Pfizer (PFE: news, msgs) under the name Celebrex.
Analysts were watching to see if Vioxx's potency and safety profile is better than rival Celebrex, which has been hugely successful. The uses for Vioxx backed by the FDA panel may be narrower than Merck had hoped, Keeney said.
"...Although denied by management, we believe that Merck may have been counting on a better label for gastrointestinal and kidney side effects for its pending Vioxx than was recommended last week by FDA's advisory meeting," Keeney said.
Further, he said, a lack of differentiation between non-steroidal anti-inflammatory drugs' class-related side effects when compared with Celebrex may make it difficult for Merck to capture a dominant share of the market for arthritis drugs.
"Consequently, sales of Merck's pending Vioxx product in 2000 may have difficulty exceeding $1.3 billion, as little differentiation in side effect labeling may slot it for use primarily in the short-term analgesic use market," Keeney said.
At that level of Vioxx sales, with no other major new drugs scheduled for introduction in 2000, we estimate that Merck's EPS growth rate next year may struggle to maintain a double-digit rate," Keeney said.
Shares of Merck fell 1 3/4 to 74.
Other large-cap pharmaceuticals makers also fell.
WLA
NYSE
Last Chg.
66 7/8 -1
% Chg. Vol.
-1.47% 3,334,400
Day Lo. Day Hi.
65 3/8 68 1/16
Open Prev.
68 67 7/8
As of
Apr 27/99 9:04 am ET
Last Trade
Apr 26/99 5:01 pm ET
20 MIN. DELAY
Pfizer (PFE: news, msgs) was down 3 2/4 to 123 3/4; Schering-Plough (SGP: news, msgs) slipped 7/8 to 52 13/16; Johnson & Johnson (JNJ: news, msgs) fell 1 9/16 to 100 3/16.Warner-Lambert (WLA: news, msgs) fell 1 to 66 7/8. On Monday, the company posted first-quarter earnings that were a penny ahead of Wall Street's estimates. See full story.
Bucking the trend, SmithKline Beecham (SBH: news, msgs) rose 2 3/16 to 69 9/16.
Keeney said sales of $1 billion to $1.3 billion for Vioxx in 2000 may provide no lift to Merck's EPS growth.
Stephanie O'Brien is a reporter for CBS MarketWatch.
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