Merck withholds forecasts after cholesterol study

NEW YORK (Reuters) - Merck & Co Inc cut its sales outlook on two key medicines on Monday and indicated its financial forecasts were in doubt after a mostly negative study of cholesterol treatment Vytorin, sending its shares down 7 percent.

It was the second dose of bad news on Monday for the drugmaker. Merck shares dropped 6.2 percent in regular trading after the study on Vytorin, sold with Schering-Plough Corp, showed it failed to prevent further damage to patients with impaired heart valves.

Merck's dour outlook overshadowed better-than-expected second-quarter results from the company.

"The initial thoughts on Merck not reiterating their long- term guidance and lowering their revenue guidance on Gardasil and Singulair is going to raise a lot of questions about the company's results," Leerink Swann analyst Seamus Fernandez said.

Merck projected 2008 sales of between $1.4 billion and $1.6 billion for Gardasil, which prevents infection with the sexually transmitted virus that causes cervical cancer in girls and women. That is down from its prior view of $1.9 billion to $2.1 billion.

The lowered forecast was due in part to the company's failure earlier this year to win U.S. approval to market the vaccine to an older group of women.

Gardasil sales have been under pressure because of slowing use among girls 13-18 years old and difficulties motivating vaccination among 19-26-year olds, Merck said.

The company now expects revenue for Singulair, which treats asthma and allergy, of $4.4 billion to $4.6 billion, compared with $4.6 billion to $4.8 billion previously. Demand for the pill has been hurt by recent warnings it can increase the risk of suicidal thoughts. For the quarter, Singulair sales fell 1 percent to $1.1 billion.

Both Merck and Schering had delayed reporting earnings from before the market opened on Monday until after the markets closed to allow for the Vytorin update.

Schering said its second-quarter earnings fell on charges from its recent acquisition of Organon Biosciences, although its results were better than analysts expected.

Merck said it would not provide long-term financial forecasts as it assesses the impact of the Vytorin study. It previously targeted double-digit compound annual earnings-per- share growth from 2005 through 2010, excluding certain items.

It also said it was not providing a full-year earnings forecast.

"We are moving quickly to fully assess the potential implications of the data for our cholesterol joint venture," Merck Chief Executive Richard Clark said in a statement.

For the second quarter, the drugmaker said it earned $1.77 billion, or 82 cents per share, compared with $1.68 billion, or 77 cents per share, a year earlier.

Excluding restructuring charges, the company earned 86 cents per share, 3 cents better than the average estimate of analysts, according to Reuters Estimates.

Revenue fell 1 percent to $6.05 billion.

Merck, which has been shaving costs through a restructuring, said material and production costs fell 10 percent, while marketing and administrative expenses dropped 7 percent.

Its new diabetes drug Januvia was a standout, with sales more than doubling to $334 million.

The combined worldwide sales of cholesterol drug Zetia and Vytorin, which pairs Zetia with its older drug, Zocor, fell 9 percent to $1.2 billion.

Vytorin sales, and the share prices of Merck and Schering-Plough, have been hurt since the medicine failed in January to meet the primary goal of another study.

The global sales of its Fosamax osteoporosis drugs slumped 48 percent to $411 million. Fosamax revenue is being eroded by generic competition after the branded product lost U.S. patent protection in February.

Merck shares fell to $32.80 in after-hours trading from their close at $35.33 on the New York Stock Exchange.

(Additional reporting by Deepa Seetharaman; Editing by Andre Grenon)