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Biotech / Medical : Merck -- Ignore unavailable to you. Want to Upgrade?

To: Nick who wrote (977)	7/28/1998 6:48:00 PM
From: Anthony Wong	Respond to of 1580

Bloomberg: Merck Sets $5 Bln Stock Buyback, Raises Dividend 20% (Update2) Bloomberg News July 28, 1998, 5:41 p.m. ET Merck Sets $5 Bln Stock Buyback, Raises Dividend 20% (Update2) (Adds research budget in 7th paragraph, Astra agreement in 11th.) Whitehouse Station, New Jersey, July 28 (Bloomberg) -- Merck & Co., the world's biggest drugmaker, said it will buy back as much as $5 billion in stock and raise its quarterly dividend 20 percent after getting $4 billion in cash as it quit two joint ventures. The announcement comes one week after the stock fell 7.1 percent on a warning that 1998 profit would be at the lower end of analysts' estimates. The buyback could ease concerns about Merck's ability to boost profits as its biggest drug, the cholesterol-reducer Zocor, faces competition from Warner-Lambert Co.'s similar drug, Lipitor. ''You don't go out and do this as a bluff,'' said Jeffrey Kraws, an analyst with Everen Securities, who rates Merck an ''outperform.'' ''It's a signal to the marketplace that Merck is highly confident.'' Merck had said repeatedly it wouldn't merge or buy a rival drugmaker with the proceeds of the buyouts. The company said it will look to its own laboratories and partnerships with smaller companies to develop new drugs. Merck fell 9/16 to 124 1/2, after hitting a low earlier in the day of 120 13/16. The stock hit an all-time high of 139 1/8 on July 17. The $5 billion buyback represents about 3.4 percent of Merck's market capitalization, or about 40 million shares. Buying back stock lets companies boost earnings by reducing the number of shares outstanding. R&D Merck already uses much of its cash to fund its $2 billion budget for research and development. Excess cash is returned to shareholders through dividends and share repurchase programs, Merck said. The Whitehouse Station, New Jersey-based company said it will raise the dividend to 54 cents from 45 cents in the fourth quarter, payable Oct. 1 to shareholders of record Sept. 4. Merck already has another $5 billion stock buyback in place. The current program started in 1997. Through June 30, Merck spent $2.5 billion under this program to repurchase 24 million shares, the company said. The new buyback program comes after Merck's sale of its stake in a joint venture to DuPont Co., the largest U.S. chemical company, for $2.6 billion and its restructuring of another joint venture with Astra AB, which included an immediate payment of $1.4 billion to Merck. Both transactions closed July 1, Merck said. Astra AB will eventually pay Merck a total of at least $4 billion in cash -- or more, depending on sales -- in 2008, the earliest date it can buy out Merck's stake in a joint venture. The venture sold the world's biggest drug, the ulcer treatment Prilosec in the U.S. The former venture with DuPont, since renamed DuPont Pharmaceutical Co., sells the blood-thinner Coumadin. Merck has won U.S. Food and Drug Administration approval of five drugs since December, including its pill for male baldness, Propecia. Merck needs new products to prepare for the loss of patents by 2001 on four drugs that had more than $5 billion in 1997 sales. --Kerry Dooley in the Princeton newsroom (609) 279-4016/dd