NEW YORK (Reuters) - U.S. drugmakers Pfizer Inc (PFE.N) and Merck & Co Inc (MRK.N) posted better-than-expected quarterly results, helped by cost savings from their respective mega-mergers that could boost results for several more years.
The companies also stood by their long-term forecasts. Their shares rose about 2 percent, even as the broader market sank and Merck gave a 2010 earnings forecast that could fall short of Wall Street’s target.
“It wasn’t a wow quarter, but the fundamentals of both companies look reasonably attractive,” said Barclays Capital analyst Tony Butler. He said both drugmakers may have issued conservative forecasts for this year, due in part to uncertainty how the dollar will affect overseas sales.
Pfizer in October paid $67 billion for Wyeth, acquiring its biotech drugs and technology for making new biotech products. The following month Merck bought Schering-Plough for $41 billion, gaining its promising drugs in late-stage testing.
“It looks like both companies are already getting leverage from merger-related cost savings, and it’s going right to the bottom line,” said Morningstar analyst Damien Conover.
Also on Tuesday, Teva Pharmaceutical Industries Ltd TEVA.O (TEVA.TA) of Israel, the world’s biggest generic drugmaker, said strong sales of its Copaxone multiple sclerosis drug and U.S. sales of generic products gave it a forecast-beating profit.
But disappointing generic sales in Europe marred results for Teva, whose shares fell about 2 percent.
Drugmaker results in the quarter have been pinched by the new U.S. reform law, which requires companies to provide heftier price rebates to patients in the government Medicaid insurance program for the poor.
“The results for Merck and Pfizer also complete that theme we’ve seen for other drugmakers this quarter, that largely good results are offsetting the costs of healthcare reform,” Conover said.
Merck earned $299 million, or 9 cents per share, for the first quarter, amid special charges and a tax expense related to the healthcare reform law. That compared with $1.43 billion, or 67 cents per share in the year-earlier period.
Excluding special items, Merck earned 83 cents per share. Analysts had on average expected 75 cents per share, according to Thomson Reuters I/B/E/S.
Merck sales more than doubled to $11.4 billion on the strength of the Schering deal. Analysts had looked for $11.2 billion.
Sales of the Januvia diabetes franchise jumped 32 percent to $712 million, including explosive growth outside the United States, well ahead of the consensus estimate of $622 million of six analysts, according to Thomson Reuters I/B/E/S.
Sales of the Singulair asthma pill rose 10 percent to $1.17 billion, just ahead of the consensus estimate.
Merck said quarterly results were helped by a $75 million to $100 million inventory buildup of its vaccines in the United States, and lower-than-expected research spending.
The company expects 2010 earnings of $3.27 per share to $3.41 per share, excluding special items. Analysts were expecting $3.41 per share. The forecast would amount to flat earnings to a decline of 4.2 percent, largely due to plunging sales of its Cozaar blood pressure drug that began facing generic rivals last month.
Merck continues to target high single-digit compound annual earnings growth for the newly combined company from 2009 to 2013, when compared with Merck’s 2009 earnings.
The company, based in Whitehouse Station, New Jersey, said it remains on track to achieve annual cost savings of $3.5 billion from the merger in 2012.
Merck is hosting a highly anticipated meeting for analysts next week to showcase its research pipeline for the first time since its takeover of Schering-Plough.
Pfizer earned $2.03 billion, or 25 cents per share, in the quarter. That compares with $2.73 billion, or 40 cents per share, in the year-earlier period.
Excluding special items, Pfizer earned 60 cents per share. Analysts on average had expected 53 cents per share.
Pfizer posted revenue of about $16.75 billion, a bit better than analysts’ expectations of $16.58 billion.
Sales of its Lipitor cholesterol fighter edged 1 percent higher to $2.76 billion, above the consensus estimate of $2.64 billion of eight analysts.
Sales of Lyrica, for neuropathic pain, rose 6 percent to $723 million, roughly in line with the consensus estimate.
Pfizer backed its 2010 profit forecast of $2.10 per share to $2.20 per share, excluding items, despite costs of health reform. The forecast would amount to growth of 4 percent to 9 percent.
The New York-based drugmaker affirmed its 2012 profit forecast of $2.25 per share to $2.35 per share, excluding items. The outlook suggests the Wyeth merger will prevent Pfizer earnings from plunging once Lipitor goes generic as soon as late 2011.
“We will be growing our earnings through the expiration of Lipitor, clearly one of the many benefits the merger is helping us address,” Pfizer Chief Financial Officer Frank D‘Amelio said in an interview.
D‘Amelio said Pfizer still aims to achieve annual cost reductions of about $4 billion to $5 billion by the end of 2012, compared with 2008 combined costs of Pfizer and Wyeth.
Reporting by Ransdell Pierson and Lewis Krauskopf, editing by Dave Zimmerman and Gerald E. McCormick