Charges linked to the $1.1 billion acquisition of Sirna Therapeutics and the legal fighting fund for painkiller Vioxx and osteoporosis drug Fosamax, plus falling sales of the cholesterol-lowerer Zocor, have taken their toll on profits at Merck & Co in the fourth quarter.
Net income fell 57.7% to $473.9 million or $0.22 per share, pegged back by the $466 million charge taken for the Sirna purchase, and an extra $75 million which increased to $858 million the amount set aside to defend against 27,400 lawsuits brought by Vioxx (rofecoxib) users and their families claiming the recalled drug caused heart attacks. $48 million was set aside to fight lawsuits which claim Fosamax (alendronate) damages the jawbone and $55.8 million was spent as part of Merck’s plan to cut 7,000 jobs, or 11% of its workforce, between 2005 and 2008. 900 jobs went in the quarter.
Revenues in the quarter grew 4.8% to $6.04 billion, which was pretty respectable given the brutal impact of generic competition to Zocor (simvastatin) in the USA, which saw sales fall 65% to $379 million. However this was offset by the contribution of the cholesterol drugs Zetia (ezetimibe) and Vytorin (ezetimibe and simvastatin), from Merck’s joint venture with Schering-Plough, which together brought in more than $1.1 billion.
Other financial highlights included a 17% increase in sales of asthma drug Singulair (montelukast) to $960 million, while vaccine revenues more than doubled to $683 million, helped principally by the strong performance of new cervical cancer vaccine Gardasil, which was approved in June in the USA and contributed $155 million. The new diabetes drug Januvia (sitagliptin), only available since October, brought in $42 million, while Fosamax sales were flat at $789 million.
The results were pretty much in line with analysts’ expectations and the shadow of Vioxx now seems less menacing. Deutsche Bank’s Barbara Ryan said in a research note that “while the uncertainty of the Vioxx litigation remains, we continue to believe that the costs will be paid out beginning several years from now, and that they will be at a level which is entirely manageable for Merck."