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Merck profit off; shares up on drug sales
2006-10-20
Merck & Co. Inc. said on Friday that third-quarter profit fell due to plunging sales of its Zocor cholesterol drug and a charge related to its withdrawn Vioxx painkiller, but its stock rose on strong sales of many of its other medicines. Merck (NYSE:MRK) took a charge of $598 million, or 19 cents per share, for future legal expenses to fight thousands of lawsuits by former Vioxx users who claim they were harmed by the former $2.5 billion-a-year arthritis drug. Excluding the charge, "earnings per share would have been around 70 cents, massively surpassing expectations, and speaks to the company's renewed and underappreciated momentum," said Morgan Stanley analyst Jami Rubin. Merck's earnings and revenue were badly hurt after it withdrew Vioxx in September 2004, sendings its shares plunging. On Friday for the first time, the stock surpassed its level just before Vioxx was withdrawn and is up a whopping 42 percent this year. Third-quarter profit dropped to $941 million, or 43 cents per share, from $1.42 billion, or 65 cents per share, in the year-ago period. The company earned 51 cents per share, excluding a charge of 8 cents per share for factory closings and job eliminations, but including the new Vioxx legal charge -- 1 cent better than Wall Street expectations. The company has bounced back on surging sales of two new cholesterol drugs it shares with Schering-Plough Corp. (NYSE:SGP), three new vaccines and strong demand for asthma drug Singulair -- all reflecting well on Richard Clark, who took over as chief executive in May 2005. Vioxx was withdrawn after it was linked to an increased risk of heart attack, and Merck said it now faces 23,800 lawsuits from former users of the medicine. It had previously taken a $685 million charge for Vioxx legal expenses. Merck has vowed to fight each plaintiff one by one, rather than pay a costly national settlement. Five more Vioxx trials are scheduled to begin before the end of this year. The company posted quarterly sales of $5.41 billion, virtually unchanged from a year ago, as growing sales of many of its drugs were offset by falling sales of Zocor, which lost U.S. patent protection in June. Sales exceeding Wall Street estimates of $4.96 billion. Zocor sales suffered a 65 percent decline to $371 million. Merck had revenues of about $500 million from its 50 percent share in the Schering-Plough joint venture in two new fast-growing cholesterol drugs, Vytorin and Zetia. Sales of Singulair jumped 25 percent to $868 million. Combined sales of blood pressure medicines Cozaar and Hyzaar rose 8 percent to $813 million. But global revenue from osteoporosis drug Fosamax slipped 1 percent to $771 million, hurt by cheaper generic forms of the product outside the United States. Sales of vaccines climbed 64 percent to $555 million. Its new vaccines are Rotateq against the rotavirus, a main cause of childhood diarrhea; Zostavax against the virus that causes shingles; and Gardasil, which protects against strains of a virus that causes cervical cancer. Based on strong sales trends in the quarter, Merck raised its full-year 2006 profit forecast slightly to $2.48 to $2.52 per share from the previous $2.40 to $2.48. That would still be flat versus last year's profit of $2.53 per share. Shares of Merck were up 66 cents, or 1.5 percent, to $45.15 on the New York Stock Exchange. (Additional reporting by Lewis Krauskopf and Bill Berkrot)
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