Merck & Co., the second-biggest U.S. drugmaker, reported a profit that beat analyst estimates after sales of the vaccine Gardasil and rheumatoid arthritis medicine Remicade rose, but the company narrowed its 2013 profit 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 on patent expirations and foreign-currency exchange, the Whitehouse Station, N.J.-based company said Monday in a statement. 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 its top product, Januvia; the diabetes drug’s sales fell 5 percent. The company this month announced that 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 com-pared 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.
The firings announced this month come on top of 7,500 other cuts, 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 nonpharmaceutical businesses.
Merck shareholders have been most concerned that sales of Januvia 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.
A half-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 volumeand 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 its 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.
Shares of Merck & Co. Inc. fell $1.19 to close Monday at $45.35.
Under new research and development 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.
Business, Pages 23 on 10/29/2013