- The Washington Times - Tuesday, April 21, 2009

TRENTON, N.J. (AP) - Drugmaker Merck & Co. on Tuesday posted a 57 percent drop in first-quarter profit, falling short of expectations and sending its stock down, as the global recession and other factors cut sales of its drugs and joint venture income.

Last year’s quarter also benefited from a one-time pretax gain of $2.2 billion from Merck’s partnership with Britain’s AstraZeneca PLC.

Analysts called the quarter “disappointing” and “relatively weak,” with Seamus Fernandez of Leerink Swann telling investors Merck had a “top line whiff” of $460 million compared with his revenue forecast. Merck missed forecasts for nearly all of its drugs, analysts noted, and put future revenue in doubt by delaying plans to seek approval for a new migraine drug due to a safety issue.

Whitehouse Station, N.J.-based Merck said net income amounted to $1.43 billion, or 67 cents per share. A year ago, first-quarter net income was $3.3 billion, or $1.52 a share.

The maker of asthma and allergy drug Singulair and the Gardasil vaccine against cervical cancer reported revenue of $5.39 billion, down 8 percent from $5.82 billion.

Excluding charges totaling 7 cents, for restructuring and expenses related to its pending acquisition of Schering-Plough Corp., earnings per share were 74 cents. Analysts polled by Thomson Reuters were expecting, on average, 77 cents per share and of $5.77 billion.

Merck shares fell $1.68, or 6.7 percent, to $23.54.

The company said the strong dollar reduced global sales by 3 percent in the quarter, and generic competition for its blockbuster osteoporosis drug Fosamax pulled down sales by another 3 percent. Wholesalers reducing their inventories cut revenue an additional $75 million to $100 million.

“We expected the first quarter to be our most challenging in 2009,” Chief Executive Richard T. Clark told analysts during a conference call.

Merck reduced much of its financial forecast for the rest of 2009 but said the second half of the year should be better. Management cited reasons including an expected end to wholesaler cutbacks and a return to normal shipping on a couple of vaccines plagued by production problems.

Analyst Catherine Arnold of Credit Suisse wrote to investors that the experimental migraine drug, telcagepant, was “widely seen as the company’s largest near-term pipeline opportunity.” Analysts have forecast peak sales of $1 billion to $1.2 billion within several years.

Merck had planned this year to seek approval to sell the drug, but in one study, some patients developed signs of possible liver damage.

Meanwhile, sales of the cholesterol drugs Vytorin and Zetia, which Merck sells under a partnership which Schering-Plough Corp., plunged 23 percent in the quarter to $945 million; the drugs have been hurt by questions about their effectiveness and safety.

Sales of Gardasil dropped 33 percent to $262 million, and Fosamax sales plunged 44 percent to $261 million.

Most other Merck drugs saw slight sales drops, including Singulair, at $1.1 billion.

Diabetes pills Januvia and Janumet both rose, to $411 million for Januvia and $128 million for Janumet.

The company backed its earnings-per-share expectations, excluding one-time items, at $3.15 to $3.30 per share.

Merck reduced its forecast including one-time charges to between $2.84 and $3.09 per share, down from the $2.95 to $3.17 forecast in January, because of acquisition costs. It also cut its revenue forecast to a range of $23.2 billion to $23.7 billion, down $500 million.

Merck said preparations for the $41.1 billion Schering-Plough acquisition, set to close in the fourth quarter, are progressing as planned, with $8.5 billion in bank financing now complete.

Merck noted its spending on research and development jumped 14 percent, to $1.2 billion.

Also Tuesday, Merck said it has signed a worldwide license deal with Medarex Inc. and University of Massachusetts Medical School for two experimental antibody-based compounds to treat the dangerous C. difficile infection. The deal could be worth up to $225 million for the other two parties.

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