Drugmaker Merck & Co. on Tuesday posted a 57 percent drop in first-quarter profit, falling short of expectations, because of a drop in both sales of its drugs and income from its partnership on cholesterol medicines.
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. Merck also said the global recession hurt results.
The maker of asthma and allergy drug Singulair and the Gardasil vaccine against cervical cancer 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 Whitehouse Station, N.J.-based company reported revenue of $5.39 billion, down 8 percent from $5.82 billion in the first three months of 2008.
Excluding charges totaling 7 cents, for a restructuring program begun last year and for 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 revenue of $5.77 billion.
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.
Sales of the cholesterol drugs Vytorin and Zetia, which Merck sells under a partnership which Schering-Plough Corp., plunged 23 percent to $945 million; the drugs have been hurt by questions about their efficacy 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; blood pressure medicines Cozaar and Hyzaar, at $839 million; and the rotavirus vaccine Rotateq, at $134 million.
Sales of a few newer products were up 50 percent or more. Diabetes pills Januvia and Janumet rose to $411 million and $128 million, respectively, and HIV drug Isentress posted $148 million in sales.
"Our first-quarter results in part reflect the impact of the difficult global economy on patients, providers and payers, but we remain on track to meet our full-year earnings guidance," Chief Executive Richard T. Clark said in a statement.
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. It also reduced its expected revenue, to a range of $23.2 billion to $23.7 billion, down $500 million from its January forecast.
Merck said preparations for the Schering-Plough acquisition, set to close in the fourth quarter, are progressing as planned, with bank financing now complete.
The $41.1 billion deal would give Schering-Plough shareholders a combination of stock and cash, with only $8.5 billion of the price being financed, a result of the credit crunch.
Merck noted its spending on research and development jumped 14 percent, to $1.2 billion, and materials and production costs were up 8 percent to $1.3 billion in the first quarter. Those increases were partly offset by a 12 percent decline in marketing and administrative costs, to $1.6 billion.