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Sales miss, Vioxx hurt Merck

Merck & Co. (MRK-N) reported disappointing quarterly sales Friday and took an almost $1-billion US charge related to a previously disclosed U.S. government probe of its recalled Vioxx arthritis drug.

Merck, like most big U.S. drugmakers in the third quarter, beat profit forecasts even though its sales fell short, as results were bolstered by cost cuts, lower taxes or other factors. And as with its rivals, investors seemed to pay greater heed to the sales disappointment.

“It's a skittish market, so the market could react to Merck's sales miss,” said Peter Jankovskis, co-chief investment officer of OakBrook Investments.

Even so, Jankovskis said Merck seems poised for good long-term performance thanks to drugs acquired through its purchase last November of Schering-Plough, including a number of promising experimental medicines now in late-stage trials.
Global company revenue almost doubled to $11.12 billion in the quarter, reflecting the addition of Schering-Plough's array of drugs and consumer products. But that was shy of the average Wall Street forecast of $11.24 billion.

Third-quarter earnings of the combined company fell 89 percent to $372 million, or 11 cents per share, reflecting charges related to the merger as well as the new $950 million Vioxx legal reserve.
Merck said the charge relates to a probe by U.S. prosecutors in Massachusetts of Vioxx - Merck's onetime blockbuster arthritis drug that was recalled in 2004 after being linked to heart risks.
The company earned $3.46 billion, or $1.61 per share in the year earlier period.

Excluding special items, including $638 million in tax benefits, Merck earned 85 cents per share. Analysts on average expected 82 cents per share, according to Thomson Reuters I/B/E/S.
“The key contributors to the earnings beat, relative to our estimates, were higher equity income and a lower tax rate,” Sanford Bernstein analyst Tim Anderson said in a research note.

Merck raised the lower end of its full-year 2010 earnings forecast, excluding special items, by 2 cents per share, to $3.31, while keeping its high-end forecast of $3.39 per share.

The company still expects high single-digit compound annual profit growth from 2009 to 2013, when compared to earnings last year. CTV Two CTV News CTV News Channel BNN - Business News Network CP24