Merck 3Q profit up 2 pct despite sales decline
Drugmaker Merck & Co. said Friday that third-quarter profit rose 2 percent as lower spending and taxes, plus sales growth for several key medicines, offset new generic competition slashing sales for its top-selling drug, Singulair.
The maker of diabetes pill Januvia beat Wall Street's profit expectations by 2 cents. The company also narrowed its 2012 profit forecast to a range of $2.08 to $2.24 per share, from $2.04 to $2.30.
Merck, based in Whitehouse Station, N.J., said net income was $1.73 billion, or 56 cents per share. That was up from $1.69 billion, or 55 cents per share, a year earlier.
Excluding acquisition, integration and restructuring charges totaling $1.2 billion, net income was $2.93 billion, or 95 cents per share.
Revenue was $11.5 billion, down 4 percent. Analysts expected $11.57 billion. Unfavorable exchange rates lowered revenue by 4 percent.
Merck shares fell 15 cents to close at $46.15 Friday.
Sales of asthma and allergy pill Singulair, which brought Merck $5.5 billion last year, dove 55 percent to $602 million. Its U.S. patent expired on Aug. 3 and multiple generic rivals immediately hit the market. Prescriptions for Singulair filled in the U.S. dropped by 90 percent in just the first month.
Despite that, Merck met its pledge to keep total revenue at or near last year's level, excluding the effects of unfavorable currency exchange rates, CEO Kenneth Frazier told analysts during a conference call.
He credited strong global sales of key existing drugs and some new ones, along with sales jumping 15 percent in emerging markets such as China and India, excluding currency effects.
"Our results this quarter reflect the continuing momentum of our underlying business," Frazier said.
He said the company has been launching new consumer and animal health products, expanding sales into more countries and managing its spending while investing for future growth.
Emerging markets _ a key growth area for large drugmakers _ produced about 20 percent of prescription drug revenue. But recent price cuts in Japan, and continuing pricing pressure from cash-strapped European government health programs, reduced revenue.
Like nearly all big drugmakers, Merck has recently been hurt by new generic competition to a top seller, as patients and insurance plans defect almost overnight to the much-cheaper copycat drugs. But Merck has fared better than most, with only a small drop in total revenue and slightly higher profit.
That's because four growth drivers posted sales increases of at least 15 percent: Januvia and combination diabetes pill Janumet, HIV drug Isentress and Gardasil, a vaccine against sexually transmitted cancers caused by human papilloma virus. Januvia and Janumet together brought in nearly $1.4 billion.
In addition, the company reduced spending on production, marketing and administration by 5 percent or more and on research by 2 percent. And it benefited from lower taxes due to favorable one-time items.
BernsteinResearch analyst Dr. Timothy Anderson noted the lower tax rate boosted earnings per share by about a nickel, so the company would have missed expectations without it.
Merck "did well in one of the two key areas for drug companies facing generic competition: It reduced expenses," said nalyst Erik Gordon, a professor at University of Michigan's Ross School of Business. "The jury is out on its performance in the other key area, getting new products out the door to replace old products going off patent."
Prescription drug sales fell 5 percent to $9.88 billion. But consumer health products, led by the Coppertone sun-care line and Dr. Scholl's foot-care products, saw sales climb 7 percent to $451 million. Sales of veterinary medicines dipped 1 percent to $815 million.
Frazier said the company is on track to apply for approval of four new drugs this year and even more next year, including submitting new data as it tries a second time to get U.S. approval of Bridion, a drug to reverse the effects of anesthesia.
The other drugs include a new type of insomnia drug that produces minimal morning grogginess called suvorexant, osteoporosis drug odanacatib, cholesterol medicine Tredaptive, ovarian and lung cancer drug vintafolide, anticlotting drug vorapaxar and an improved version of Gardasil that blocks more virus strains.
Frazier said Merck will soon start midstage patient testing of an Alzheimer's disease drug. It works by blocking formation of brain plaques believed to be the underlying cause of the memory-robbing disease. Rival experimental drugs that have had disappointing results recently work differently.