* 3rd-qtr EPS, excluding items, $0.95, vs $0.92 forecast
* 3rd-qtr sales $11.49 bln, vs $11.57 bln forecast
* One-time tax gains drive profit beat
* Shares slip 0.6 pct
(Adds details on experimental psoriasis drug, updates shares)
By Ransdell Pierson
Oct 26 Merck & Co Inc posted a
higher-than-expected quarterly profit as one-time tax gains
helped offset plunging sales of its former flagship product,
Singulair, an asthma drug that began facing cheaper generics in
But overall third-quarter sales came in slightly below Wall
Street expectations on Friday, as Singulair's decline outpaced
already-grim predictions for it.
"There was nothing excellent about the quarter, but nothing
scary about it either," said Michael Liss, portfolio manager of
American Century Investments, whose mutual funds own Merck
Sales of Singulair tumbled 55 percent to $602 million.
However, a number of Merck's newer products - including
treatments for diabetes, hepatitis C and HIV - generated
double-digit sales gains that helped cushion Singulair's free
All told, global company revenue fell 4 percent to $11.49
billion in the quarter, below Wall Street expectations of $11.57
Liss said the slim decline was acceptable, given the
Singulair generics, especially in view of potential new revenue
streams from medicines Merck is shepherding through clinical
"They're doing the right things they need to do to position
themselves for growth over the next three to five years," Liss
said, citing experimental drugs to treat cholesterol,
Alzheimer's disease, insomnia, osteoporosis and other diseases.
Merck needs the new drugs to cushion Singulair's swoon, but
also to withstand looming generic competition for other
important medicines. Its Maxalt migraine drug, with $600 million
in annual sales, goes generic in December, followed next year by
its Temodar brain cancer medicine, which has near-blockbuster
sales of $900 million.
Over the next 18 months, Merck aims to seek six drug
approvals, including marketing applications for insomnia
treatment suvorexant and osteoporosis treatment odanacatib.
In a conference call with analysts, Merck officials
described plans within months to begin a late-stage trial of a
new psoriasis drug and mid-stage trials of an Alzheimer's
disease treatment - called a beta secretase inhibitor.
The psoriasis drug, called MK-3222, works by blocking a
protein called IL-17 linked to inflammation.
"Psoriasis is a great market because of the unmet medical
need and if this drug is effective it could easily be a
blockbuster product," with annual sales of $1 billion or more,
said Morningstar analyst Damien Conover.
Amgen Inc's Enbrel is the best-selling current
treatment for psoriasis, with expected 2012 U.S. sales for the
skin condition of $1.18 billion, according to Cowen and Co.
Merck, the No. 2 U.S. drugmaker, said it earned $1.73
billion, or 56 cents per share, compared with $1.69 billion, or
55 cents per share, in the year-earlier quarter.
Excluding special items, Merck earned 95 cents per share.
Analysts, on average, expected 92 cents.
Jefferies & Co analyst Jeffrey Holford had predicted a tax
rate of 26 percent, but it came in at 20.3 percent. He called
the profit beat "low quality" because it was tax-driven.
"Gross margins were also weaker than expected," Holford
said, and noted that Singulair sales were about $75 million
below what he had expected.
Merck tightened its full-year profit forecast to between
$3.78 and $3.82 per share, from its earlier view of $3.75 to
$3.85 per share.
The company's shares were down 0.6 percent at $46.03 on
Friday morning on the New York Stock Exchange.
(Reporting by Ransdell Pierson; editing by Lisa Von Ahn,
Jeffrey Benkoe, Steve Orlofsky, Matthew Lewis and Andrew Hay)