Merck almost doubles quarterly profit on one-time gain
TRENTON, New Jersey: Merck Co. reported Monday it nearly doubled its first-quarter profit, with the drugmaker citing a $1.4 billion (\0.88 billion) payment from a partner drug company and sales up slightly from last year.
The maker of allergy and asthma pill Singulair and cervical cancer vaccine Gardasil posted net income of $3.3 billion (\2.08 billion), or $1.52 (\.96) per share, for the January-March period, up from $1.7 billion (\1.07 billion), or 78 cents a share, a year ago.
The $1.4 billion (\0.88 billion) gain from AstraZeneca PLC, $2.22 billion (\1.4 billion) before taxes, was a scheduled payment from a decades-long deal under which the London-based company promotes chronic heartburn drug Nexium and several other products in which Merck owns an interest. Excluding that and other one-time items, Whitehouse Station, New Jersey-based Merck earned 89 cents per share in the latest quarter.
That was 3 cents more than the forecast of analysts surveyed by Thomson Financial, who were expecting 86 cents per share, excluding one-time items.
Revenues totaled $5.82 billion (\3.66 billion), up 1 percent from $5.77 billion (\3.63 billion) in the first three months of 2007 but below analysts expectations of $6.11 billion (\3.84 billion).
Merck shares slipped 5 cents to $39.71 (\24.98) in late morning trading. They have traded in a 52-week range of $36.82 (\23.16) to $61.62 (\38.76).
Merck, which is in the process of settling massive litigation over its withdrawn painkiller Vioxx with a $4.85 billion (\3.05 billion) agreement, got hit with some new problems during the quarter.
Its osteoporosis treatment Fosamax, which had been the leading drug in the category and one of Mercks top sellers, got new generic competition, cutting sales by 37 percent to $470 million (\295.63 million). The company also reserved $40 million (\25.16 million) for legal defense costs amid about 940 lawsuits alleging the drug damaged jaw bone in some patients.
In addition, Merck and New Jersey neighbor Schering-Plough Corp., which have a profitable partnership selling cholesterol drugs, got a black eye when congressional investigators and some doctors alleged that to protect sales of their blockbuster drug Vytorin, the companies delayed releasing negative study results expected to significantly hurt revenues.
When the full results were finally released last month, nearly two years after the study ended, they showed Vytorin was no better than generic Zocor at reducing plaque buildup to neck arteries. Vytorin combines Mercks Zocor and Schering-Ploughs Zetia. Since mid-January, Merck has been served with about 115 potential class-action lawsuits alleging fraud in the companies promotion of the drugs.
“We anticipate that the confusion in the marketplace (over the study results) will cause sales of Vytorin and Zetia to be significantly lower than expected for the entire year,” Mercks chairman and chief executive officer, Richard T. Clark, told analysts Monday.
Because of that, he said Merck has lowered its expected 2008 income from that joint venture by $700 million (\440.31 million).
However, the company said it expected its blood pressure drugs Cozaar and Hyzaar, as well as other products, to pick up the slack. It reaffirmed its earnings forecast for the year of $3.28 (\2.06) to $3.38 (\2.13) per share, excluding about 60 cents worth of one-time items.
Meanwhile, Merck said that as of March 31, more than 45,000 former Vioxx users who suffered a heart attack or ischemic stroke and are eligible for its global settlement have at least started the enrollment process, keeping the settlement process on track. Eligibility of another 5,500 enrollees is not yet determined.
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