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Merck & Co., the second-biggest U.S. drugmaker, reported profit that beat analyst estimates after sales of the vaccine Gardasil and rheumatoid arthritis medicine Remicade rose. The company narrowed its forecast.
Third-quarter earnings, excluding one-time items, were 92 cents a share, beating by 5 cents the average of 17 analysts’ estimates compiled by Bloomberg. Sales fell 4 percent to $11 billion, hurt by patent expirations and foreign currency exchange, the Whitehouse Station, New Jersey-based company said today in a statement. The revenue fell short of the $11.1 billion projected by analysts.
Merck has struggled to keep investor support even after saying it will dedicate more resources to top product, Januvia. The drug’s sales fell 5 percent. The company this month announced it would fire an additional 8,500 workers and overhaul research and development. While Merck has cut positions and pursued share buybacks, its stock has increased less than 1 percent in the past 12 months compared with a 22 percent gain in the Standard & Poor’s 500 Pharmaceuticals Index.
“Merck sentiment continues to get really bad,” said Mark Schoenebaum, an analyst with International Strategy & Investment Group LLC. “I’ve become increasingly frustrated with fighting this management discount.”
The firings announced this month add to 7,500 job cuts already announced, amounting to a 20 percent reduction in Merck’s workforce. Drugmakers have been cutting expenses, research programs and positions to focus on creating new drugs, as well as selling or splitting off non-pharmaceutical businesses.
Merck shareholders have been most concerned that sales of Januvia, the company’s top-seller, will face more competition, said Tony Butler, an analyst with Barclays Plc. Third-quarter sales of Januvia fell to $927 million from a year earlier.
Half-a-dozen new treatments that could compete with Januvia may begin selling in the next two years. The medicine has already experienced most of its potential growth, while competitors are cutting prices and marketing harder, Butler said. “We believe both volume and pricing opportunities for Januvia/Janumet are limited going forward,” he said in a note to clients this month.
Net income fell to $1.12 billion, or 38 cents a share, from $1.73 billion, or 56 cents, a year earlier, the company said. The company narrowed it 2013 profit forecast to $3.48 to $3.52 a share from $3.45 to $3.55 a share.
Gardasil sales rose 15 percent to $665 million from a year earlier, the company said. Revenue from Remicade jumped 17 percent to $574 million.
Under new R&D chief Roger Perlmutter, Merck is overhauling its research labs to put more emphasis on vaccines, cancer, diabetes and hospital care. The moves will save $2.5 billion a year by 2015, according to the company.
“Merck’s belated attempts to restructure their R&D organization are encouraging, but we continue to expect material earnings disappointment compared with consensus forecasts,” Andrew Baum, an analyst with Citigroup Inc., said in a note to clients before the earnings report was released.
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