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Merck, Schering-Plough shares climb
2006-10-20
Drugmakers Merck and Schering-Plough, partners on their crucial cholesterol drugs, both saw their shares climb Friday after posting third-quarter earnings. But they pleased Wall Street for different reasons. Schering-Plough Corp. reported double-digit sales growth and a nearly sevenfold leap in profit, compared to a quarter depressed by a hefty charge. Chief executive officer Fred Hassan told analysts his company, squeezed by slumping sales and government probes just a couple years ago, had finished its turnaround and was entering a "build the base" phase in which it will reach new patients and markets. Merck & Co., hurt by new generic competition for its top-selling drug and massive litigation over withdrawn painkiller Vioxx, raised its profit forecast after one-time charges sent its latest earnings lower. Merck also said it can now reasonably estimate its Vioxx costs through 2008 and reserved an additional $598 million for future defense costs, on top of the $970 million previously set aside. But the number of Vioxx lawsuits has now topped 24,000, and an additional 15,000 potential plaintiffs have entered agreements temporarily suspending the time to sue. One thing helped both companies: a 63 percent jump in sales of the cholesterol drugs they jointly sell. Vytorin and Zetia had combined revenues edging over $1 billion for the first time. The companies split the profits, but Merck especially needs them to make up for the June U.S. patent expiration of cholesterol fighter Zocor, which once had $5 billion in annual sales. New generic competition cut U.S. sales of Zocor by 80 percent in the quarter and total sales to just $371 million, but Merck's overall revenues held steady. "I think most of the generic exposure is behind them," other than the 2008 patent expiration of arthritis treatment Fosamax, said independent pharmaceuticals analyst Hemant Shah of HKS & Co. "They would be doing extraordinarily well," if not for the Vioxx litigation. Both companies saw their shares rise Friday on the New York Stock Exchange. Merck shares climbed $1.15, or 2.6 percenbt, to close at $45.64, a new high for the year; Schering-Plough shares rose 35 cents, or 1.6 percent, to close at $22.68. "We have built a strong engine and now we're letting it run," Schering-Plough's Hassan told analysts on a conference call. Schering-Plough's net income grew to $287 million, or 19 cents per share, from $43 million, or 3 cents per share, a year ago, when results were depressed by a charge of $124 million for items including a research and development payment. Analysts surveyed by Thomson Financial expected earnings per share of 15 cents on revenue of $2.44 billion. Total revenues rose 13 percent to $2.57 billion. Analysts said the company's sales growth was consistent with the industry's performance in the past quarter, with Jami Rubin of Morgan Stanley calling Schering-Plough "one of the most compelling names" among pharmaceuticals. Sales of Nasonex allergy treatment rose 30 percent to $221 million and sales of over-the-counter products rose 10 percent to $259 million, fueled mainly by Coppertone sun products and Dr. Scholl's foot care products. Sales of Remicade, for arthritis and other inflammatory conditions, rose 34 percent to $317 million. The company noted regulators have approved Remicade to treat more disorders, including Crohn's disease and ulcerative colitis. Schering-Plough sells Remicade outside the United States, but not in some other Asian nations, while Johnson & Johnson sells it in this country. "What's there not to like?" analyst Steve Brozak of WBB Securities said of Schering-Plough's report, adding that the Remicade increase stood out as a sign that foreign government health programs are willing to pay for the pricey biotech drug. Merck reported net income of $941 million, or 43 cents per share, down from $1.42 billion, or 65 cents per share, a year ago. Excluding a charge of $249.2 million, or 8 cents per share, for cutting an additional 500 jobs and other restructuring costs, net income would have equaled 51 cents a share. Revenues were flat at $5.41 billion. The company beat by a penny the forecast by analysts, who expected earnings per share of 50 cents, excluding one-time items, and revenue of $4.97 billion. Merck raised its full-year profit forecast to $2.48 to $2.52, excluding 30 cents worth of restructuring charges, up from its July forecast of $2.40 to $2.48. Analysts are expecting $2.48. Sales rose 25 percent for asthma and allergy treatment Singulair, to $868 million, and 8 percent for blood pressure drugs Cozaar and Hyzaar, to $813 million. But sales of osteoporosis treatment Fosamax dipped 1 percent to $771 million. Vaccine sales jumped 64 percent to $555 million, boosted by three approvals this year, including Gardasil to prevent cervical cancer. ___ On the Net: http://www.merck.com http://www.schering-plough.com
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