Earnings per share rose to .70 cents, or .75 cents excluding restructuring charges, the Whitehouse Station, N.J.-based pharmaceutical company announced Monday. Merck also raised its 2007 earnings per share projections to $2.87 to $2.93, including restructuring. Stocks reacted by rising 1.53 points, or 2.88% by the close of trading.
Gardasil, the vaccine against the human papillomavirus that causes cervical cancer, accounted for $418 million of the company’s total revenue, which rose 12% for the quarter ending September 30 and was also driven by sales of the respiratory drug Singulair, the chicken pox vaccine Varivax and diabetes medication Januvia.
The increases were offset by an addition of $70 million to fight lawsuits over the painkiller Vioxx, which Merck pulled from the market when it was linked to heart problems in 2004.
Damien Conover, an analyst for the financial website Morningstar, said most of Merck’s results were in line with analysts’ predictions, but a 17% rise in sales of Singulair was unexpected.“That’s a product that’s been out for a long time and it’s not really expanding indications much,” said Conover. “I was pretty surprised by how well sales were doing there.”
Conover attributed the strong quarter in part to a decrease in spending on the selling, general and administrative expense line, resulting from the ongoing restructuring program announced in 2005 that has led to the termination of 6,000 positions.“Mercks’s gone through quite a bit of efforts to reduce costs on that line, so I think we are seeing them come through in today’s results,” said Conover.
Marketing and administrative expenses declined by 18% and research and development rose 52% from the year before to $1.4 billion, driven by the acquisition of the biotechnology firm NovaCardia.Richard Clark, Merck’s chairman and president, called the health care market “challenging” but said Merck will continue to remain competitive thanks in part to cost reductions that were part of the restructuring.
“By sustaining our cost management initiative, Merck expects to fulfill our promise to expand the product portfolio while maintaining marketing and administrative expenses flat in 2010 relative to 2006,” said Clark.
The company also attributed the rise in earnings per share to Merck’s many joint ventures with companies including AstraZeneca LP, which accounted for $416 million of revenue in the third quarter, and Schering Plough, Merial, Sanofi Pasteur MSD and Johnson and Johnson.“Partnerships have a big contribution to the bottom line, in particular the Schering-Plough joint venture for the marketing of two cholesterol-lowering drugs – those had a significant contribution to earnings on the bottom line,” said Conover, referring to sales of Zetia and Vytorin, which grew 26% to $1.3 billion for the third quarter, compared with the third quarter of 2006.
Partnerships are becoming a growing aspect of Merck’s business, yet the company says internal research and development remain significant as well.“We continue to see outstanding results from our partnerships and alliances. This exceptional increase has led us to increase our full year EPS yet again,” said Peter Kellogg in his first earnings call as chief financial officer for the company, adding that Merck is “committed to fully funding core internal R&D to ensure the continued progress of compounds in all phases of development.”
Emily F. Keller wrote and reported this article while attending the City University of New York Graduate School of Journalism.
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