Merck & Co. Swings To Q4 Profit On Lower Charges

Published February 2, 2012 3:27PM (EST)

Drugmaker Merck & Co. swung to a fourth-quarter profit because of lower acquisition and restructuring charges and slightly higher sales.

The company forecast little improvement this year, when its top-selling drug, the allergy and asthma drug Singulair, is set to face competition from cheaper generic versions. Merck executives also cited increased pressure for lower drug prices, now in some key emerging markets as well as Europe, and a shift to unfavorable exchange rates as factors that will hurt revenue this year.

That echoed comments of other drugmakers that have reported results in the past two weeks.

Merck, the maker of the cervical cancer vaccine Gardasil and diabetes blockbusters Januvia and Janumet, said Thursday that net income was $1.51 billion, or 49 cents per share. A year earlier, Merck lost $531 million, or 17 cents a share.

Adjusted income was $2.98 billion, or 97 cents a share, up from $2.76 billion, or 88 cents a share. The earnings topped expectations for 95 cents per share, according to FactSet.

Revenue rose 1.6 percent $12.29 billion, short of expectations for $12.52 billion.

"We had a good quarter and a strong overall year," CEO Kenneth Frazier, who took over a year ago, told analysts on a conference call. "We are committed to strong operational growth despite challenges such as the Singulair patent expiration."

He said Merck has some newly approved drugs launching in various countries, got approval in the last quarter to market two drugs to additional patient groups, and plans during 2012 and 2013 to apply for approval of five major products in the U.S. and other countries.

The company, based in Whitehouse Station, N.J., forecast 2012 earnings per share of $3.75 to $3.85, excluding charges. Analysts expect $3.83. Including charges, Merck expects earnings per share of $2.04 to $2.30. The company said it expects revenue at or near 2011's total, whic was just over $48 billion.

In early trading, Merck shares fell 41 cents, or 1 percent, to $38.22.

Total pharmaceutical revenue was up 3 percent to $10.76 billion, led by double-digit sales growth for diabetes pills Januvia and Janumet, HIV drug Isentress and cervical cancer vaccine Gardasil. Sales rose 8 percent to $1.46 billion for Singulair, which gets generic competition in August.

Generic competition hurt sales of several prior blockbusters, including osteoporosis pill Fosamax. Meanwhile, recently approved hepatitis C drug Victrelis appeared to be off to a modest start, with revenue of $87 million in its third full quarter on the market.

Merck took charges of $1.48 billion for acquisition-related costs and $692 million for restructuring. Both are related to its ongoing integration of fellow New Jersey drugmaker Schering Plough Corp., which it bought in November 2009 for $49 billion. That deal gave Merck Schering's biotech, consumer health and veterinary medicine businesses, plus a stronger pipeline of experimental drugs. The combined company has been shedding jobs and closing some factories to reduce costs.

Merck posted much lower revenue from biologic immune disorder drug Remicade, which was down 28 percent at $511 million. That's because of a new, less-favorable revenue sharing agreement with Johnson & Johnson that followed arbitration after Merck bought Schering Plough, which had marketed the blockbuster drug jointly with J&J.

Sales of veterinary medicines rose 6 percent to $868 million. Sales of consumer health products such as nonprescription Claritin fell 5 percent to $361 million.

For the full year, Merck posted net income of $6.27 billion, or $2.02 per share, up from $861 million, or 28 cents a share. Revenue totaled $48.05 billion, up 4 percent from $45.99 billion in 2010.


Linda A. Johnson can be followed at

By Salon Staff

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