Merck & Co. reported Tuesday that fourth-quarter profit plunged 58 percent despite higher revenues as the drugmaker took a slew of charges for restructuring costs, an acquisition and increased legal reserves, mainly for its withdrawn painkiller Vioxx.
Merck, the maker of osteoporosis treatment Fosamax and Singulair for asthma and allergies, reported net income of $473.9 million, or 22 cents per share, down from $1.12 billion, or 51 cents per share, in the last quarter of 2005.
Excluding charges of 7 cents per share for its ongoing global restructuring program and 21 cents per share for the acquisition of Sirna Therapeutics, Merck would have posted earnings per share of 50 cents, matching the consensus forecast of analysts surveyed by Thomson Financial.
Whitehouse Station, N.J.-based Merck paid a steep $1.1 billion in December to buy San Francisco-based Sirna, a small biotech company with gene-silencing technology that holds promise for developing cancer and other drugs.
Merck said revenues increased 5 percent, to $6.04 billion from $5.77 billion a year earlier. Analysts had been expecting sales of $5.37 billion.
The company also said its crucial joint venture with Schering-Plough Corp. on cholesterol drugs turned in a strong performance.
Restructuring charges, for severance programs and other costs, totaled $55 million in the quarter and $142 million for the year.
On the litigation front, Merck reported that as of Dec. 31 it faced approximately 27,400 lawsuits, some involving multiple plaintiffs, alleging harm from Vioxx. The company pulled the one-time blockbuster arthritis pill from the market in September 2004 after research showed it increased risk of heart attacks and strokes.
Merck also said it faces about 265 potential Vioxx class-action lawsuits alleging personal injury or economic loss, and has entered about 14,180 agreements with other potential claimants suspending the time limit for them to sue.
The company said it added $75 million to its Vioxx legal defense fund in the quarter, and $295 million over the year.
It set aside another $48 million to start a legal defense reserve for lawsuits alleging that Fosamax destroys bone in the jaw.
Despite the problems, the company said it is still on track to produce double-digit annual growth in earnings per share, excluding one-time charges, by 2010.
For 2007, Merck forecast earnings per share of $2.51 to $2.59, excluding 10 to 15 cents per share for restructuring charges. Analysts on average are anticipating $2.60, excluding charges.
For the full year, Merck posted net income of $4.43 billion, or $2.03 per share, down 4 percent from $4.63 billion, or $2.10 per share, in 2005. Revenues totaled $22.64 billion, up 3 percent.