UPDATE 2-Merck revenue hit by weak overseas, consumer sales

Tue Jul 30, 2013 9:35am EDT

By Ransdell Pierson

July 30 (Reuters) - Merck & Co Inc's quarterly revenue fell short of expectations on disappointing results for the company's consumer and animal health products and weak overseas sales of prescription drugs that were slammed by the stronger dollar.

The second-biggest U.S. drugmaker behind Pfizer Inc said on Tuesday that it had earned $906 million, or 30 cents per share, in the second quarter, compared with $1.79 billion, or 58 cents per share, a year earlier.

Excluding special items such as costs of $1.77 billion from acquisitions and $278 million for restructuring, Merck earned 84 cents per share. Analysts, on average, expected 83 cents per share.

Revenue fell 11 percent to $11.01 billion, while Wall Street expected $11.22 billion. The results suffered from generic competition for Merck's Singulair asthma drug, which lost U.S. patent protection a year ago.

Revenue would have fallen 8 percent if not for the stronger dollar, which lowers the value of sales in overseas markets.

"Despite the revenue shortfall, Merck still drove earnings higher than expected because of lower expenses and a lower tax rate, as well as fewer outstanding shares" of its stock," said Edward Jones analyst Judson Clark.

Merck said it expected full-year sales to be about 5 percent to 6 percent below last year's levels, worse than the 3 percent to 4 percent decline it had previously forecast, largely due to the stronger dollar.

Even so, Merck said it was able to affirm its full-year 2013 profit outlook of $3.45 to $3.55 per share, excluding special items, because of aggressive cost controls. It earned $3.82 per share last year.

"We are managing our costs in order for us to meet our bottom line (earnings) guidance," Chief Executive Officer Kenneth Frazier said in a conference call with analysts.

Animal health sales fell 2 percent to $851 million, hurt by weak demand for swine products. Sales of consumer care products, which range from Dr. Scholl's foot pads to Coppertone sunscreen, dropped 11 percent to $490 million due to the termination in China of distribution arrangements and returns from those distributors.

Combined sales of diabetes treatment Januvia and a related combination drug called Janumet rose 5 percent to $1.5 billion, a rebound from a 1 percent decline in the prior quarter. But overseas sales of Januvia fell 5 percent.

Sales of arthritis drug Remicade rose 2 percent to $527 million. Gardasil, a vaccine to prevent cervical cancer and other diseases caused by human papillomavirus, was a bright spot in the earnings report. Its sales rose 18 percent to $383 million, helped by strong continued vaccination in males and increasing use in Latin America.

Merck shares were down 0.3 percent at $48.18 in early trading.

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