Merck & Co has issued a very conservative earnings and revenue guidance for 2009, saying that the stronger dollar, generic competition, weaker sales of key products and restructuring costs will hit profits.

The New Jersey-based drugmaker expects adjusted 2009 profit of $3.15-$3.30 per share, well down on analysts estimates of $3.52 per share. The company also revised its revenue forecasts for next year to $23.7-$24.2 billion, below Wall Street’s estimate of $24.6 billion. Chief executive Richard Clark said “we anticipate that top-line growth will be offset by the effects of a volatile global economy and fluctuations in the foreign exchange markets, as well as continued challenges for certain key products".

The company is predicting flat revenue next year from the anti-hypertensives, Cozaar (losartan) and Hyzaar (losartan plus hydrochlorothiazide) at $3.4-$3.7 billion, and from the cervical cancer vaccine Gardasil at $1.4-$1.6 billion. Merck is also forecasting a slowdown in growth for the asthma drug Singulair (montelukast), with sales between $4.3-$4.5 billion this year and $4.4-$4.7 billion in 2009.

However Mr Clark predicted strong growth for the Januvia (sitagliptin) diabetes franchise, as well as for its HIV drug Isentress (raltegravir) and the shingles vaccine Zostavax. He added that 2009 “will be an important execution year for Merck as we continue the transformation of our company into a more lean and flexible business”.

Next year, Merck also expects to file New Drug Applications for two candidates in Phase III – for migraine and acute heart failure.

In a research note, Tim Anderson at Sanford Bernstein said that "it is possible that, as in the past, this is intentionally conservative initial guidance that will be revised upwards through the year but we cannot be certain". He added that between currency factors and “several struggling franchises, the company does face significant headwinds in '09 and possibly beyond".

Investors are pretty worried as well, and Merck shares fell by over 5% after the guidance was released.