* Merck EPS, excluding items, $0.83; forecast $0.77
* Schering-Plough profit slightly tops expectations
* Merck shares rise 6 pct, Schering-Plough up 3.7 pct (Adds Schering-Plough earnings, analyst comments, updates share movement)
By Ransdell Pierson
NEW YORK, July 21 (Reuters) - Merck & Co (MRK.N) said second-quarter earnings fell, hurt by lower sales of its cholesterol drugs, but income from partnerships and a rebound in sales of asthma drug Singulair helped the drugmaker beat profit forecasts.
Meanwhile, smaller U.S. rival Schering-Plough SGP.N — which Merck plans to acquire in the fourth quarter — posted lower quarterly earnings that slightly topped forecasts amid growing demand for its Remicade arthritis drug.
The results moved Merck shares 6 percent higher, and boosted Schering-Plough’s stock 3.7 percent in midday trading.
“A number of Merck’s important drugs came in better than expected and everything is on track for the Schering-Plough merger,” Deutsche Bank analyst Barbara Ryan said, explaining why shares of the betrothed drugmakers were outpacing the pharmaceuticals group on Tuesday.
Merck is expected to reap huge cost savings from the Schering-Plough merger by cutting 15 percent of their combined workforce. It will acquire a number of valuable drugs, including Remicade, a promising newer arthritis treatment called Simponi (golimumab) and a potential blockbuster blood-clot preventer now in late-stage studies.
Merck earned $1.59 billion, or 74 cents per share, in the second quarter. That compares with $1.77 billion, or 82 cents per share, in the year-earlier period.
Excluding special items, Merck earned 83 cents per share, well above the average 77-cent Reuters Estimates forecast.
Revenue fell 3 percent to $5.90 billion but came in $70 million above the Reuters Estimate forecast. Sales would have risen 3 percent if not for the strong dollar, which undermines the value of overseas sales.
Sanford Bernstein analyst Tim Anderson said Merck’s equity income of $587 million from joint ventures, including its cholesterol partnership with Schering-Plough, was 15 percent higher than his forecast and helped drive the earnings beat.
Merck’s results were helped by a 10 percent decline in marketing and administrative expenses. Moreover, the drugmaker’s effective tax rate, excluding special charges and merger-related costs, was 20.4 percent, a benefit of about 5 percentage points due to favorable tax settlements.
A particularly bright spot in Merck’s earnings report was Singulair, whose sales had steadily declined in the past year due to concerns it might increase suicide risk. But its quarterly sales jumped 16 percent to $1.3 billion.
“Last year, there was a lot of negative publicity about potential safety issues with Singulair, but that has sort of gone away,” said Deutsche Bank’s Ryan, noting that U.S. regulators have not declared any direct links between the drug and suicide.
Sales of diabetes drug Januvia, a relatively new Merck treatment, rose 38 percent to $462 million.
But combined sales of cholesterol fighters Zetia and Vytorin, sold in partnership with Schering-Plough, fell 10 percent to $1 billion. The drugs have lost favor with many doctors following a pair of clinical trials that cast doubt on their effectiveness.
Sales of Merck’s Gardasil vaccine against the virus that causes cervical cancer fell 18 percent to $268 million, hurt by rival vaccine made by GlaxoSmithKline Plc (GSK.L), but the decline was not as bad as some analysts had feared.
Merck stuck with its full-year 2009 profit forecast of $3.15 to $3.30 per share excluding special items, and its full-year revenue forecast of $23.2 billion to $23.7 billion.
Schering-Plough reported net income available to common shareholders of $633 million, or 38 cents per share. That compared with $424 million, or 26 cents per share, in the year-earlier period, when the company took charges for its acquisition of Organon BioSciences.
Excluding items, Schering-Plough earned 46 cents per share, slightly above the Reuters Estimates forecast of 45 cents per share.
Sales of Remicade rose 2 percent to $565 million, but would have risen 19 percent if not for negative foreign exchange factors.
Merck shares were up $1.64 at $29.58, while Schering-Plough rose to $26.50, both on the New York Stock Exchange. (Reporting by Ransdell Pierson; editing by John Wallace, Derek Caney and Matthew Lewis)