April 21, 2009 / 11:36 AM / 10 years ago

Merck profit falls short, shares drop 5.5 pct

NEW YORK (Reuters) - Merck & Co reported disappointing sales and earnings on Tuesday due to the global economic slowdown and plunging sales of its Gardasil vaccine, and announced a reversal for its experimental migraine drug, sending its shares down 6 percent.

A general view shows the Merck facility in Rahway, New Jersey November 28, 2005. REUTERS/Jeff Zelevansky

Merck scrapped plans to seek U.S. approval this year for migraine headache drug, MK-974, after some patients taking it in a clinical trial developed elevated liver enzyme levels — a marker for toxicity. But other trials of the drug and a similar compound continue, Merck said.

“We believe this is a significant setback for the drug and Merck’s pipeline,” said Leerink Swann analyst Seamus Fernandez, who had predicted the medicine would garner annual sales of $1.2 billion by 2015.

The company also reported sales declines for its other big products, including asthma treatment Singulair and cholesterol fighters Vytorin and Zetia.

It earned $1.46 billion, or 67 cents per share. That compared with $3.33 billion, or $1.52 per share in the year-earlier first quarter when it received a big payment from marketing partner AstraZeneca.

Excluding special items, Merck earned 74 cents per share. Analysts on average had expected 78 cents per share, according to Reuters Estimates.

Global sales fell 8 percent to $5.39 billion, well below the Reuters Estimates forecast of $5.76 billion.

Sanford Bernstein analyst Tim Anderson said nearly half of Merck’s revenue miss was due to weak vaccine sales. He called the quarterly results “disappointing.”

Merck reaffirmed it expects per-share earnings this year of $3.15 to $3.30, reflecting a decline of between 3.5 percent and 7.8 percent from last year. But it trimmed its 2009 sales forecast by about $500 million, to between $23.2 billion and $23.7 billion.

“Our first-quarter results in part reflect the impact of the difficult global economy on patients, providers and payors, but we remain on track to meet our full-year earnings guidance,” Chief Executive Richard Clark said in a release.

But Merck Chief Financial Officer Peter Kellogg told analysts on a conference call that earnings in the second half of the year should “pick up nicely versus the first half,” helped in part by a better showing for Gardasil.

Clark said the company’s planned acquisition of rival drugmaker Schering-Plough Corp later this year would help assure sustainable growth in the future.

Global sales of Merck’s Fosamax osteoporosis drug, now facing generic competition in the United States, plunged 44 percent to $261 million. Sales of cervical cancer vaccine Gardasil, facing competition overseas from GlaxoSmithKline’s Cervarix vaccine, shrank by a third to $262 million.

Combined sales of cholesterol fighters Zetia and Vytorin, which Merck sells in partnership with Schering-Plough, fell 23 percent to $945 million, following several studies that questioned the drugs’ safety and effectiveness.

Singulair, Merck’s biggest product and formerly one of its fastest-growing drugs, slipped 4 percent to $1.1 billion, hurt by concerns the pill may increase risk of suicide.

Combined revenue from blood pressure drugs Cozaar and Hyzaar fell 1 percent to $839 million.

Sales of Januvia, a relatively new diabetes drug, surged 51 percent to $411 million. But rival products that work through the same mechanism of action are in advanced stages of development.

Schering-Plough earlier on Tuesday reported higher-than-expected first-quarter earnings as it took a hatchet to its research and administrative spending.

Merck shares fell 5.55 percent to $23.82 on the New York Stock Exchange early Tuesday afternoon. Schering-Plough shares were down 3.5 percent at $22.24.

Reporting by Ransdell Pierson; Editing by Derek Caney, Maureen Bavdek, Richard Chang

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