Merck & Co showed steady first quarter growth of 12%, driven by increasing demand for its allergy medication Singulair and newer products including the diabetes pill Januvia and the cervical cancer vaccine Gardasil, coupled with a strict programme of spending restraints following the loss of older drugs to generic competition.
The company said net income rose to $1.7 billion, or 78 cents a share, from $1.52 billion, or 69 cents a share the previous year. Profit, excluding costs from job cuts and plant closures, was 84 cents a share. Revenue increased 7% to $5.77 billion from $5.41 billion, beating analysts estimates. On average, analysts polled by Thomson Financial expected earnings of 84 cents a share on revenue of $5.36 billion.
Richard T Clark, chief executive officer and president, said of the results, “We still have much to do to realise our longer-term goals, but we are executing on our plan with confidence.”
Merck has struggled to increase profits since Vioxx was withdrawn from the market in September 2004 with the loss of £2.5 billion in annual revenues. The company was also hit by generic competition for its cholesterol drug Zocor when it came off patent last year losing the company a further £800 million in revenue. Clark has fired workers and closed plants to offset these losses, a policy which appears to have paid off.
“Merck’s recent successes with new products coupled with spending restraints and the recent setbacks for prospective competitors has improved the visibility of it earnings outlook,” said UBS Securities analyst Roopesh Patel in a note to clients.
In February, the US Food and Drug Administration (FDA) asked for further data on the diabetes pill Galvus, which gave Merck’s Januvia additional time in the market without a competitor. This undoubtedly helped Januvia reach sales of £87 million for the first quarter following its launch in October as the only DPP-4 inhibitor for the treatment of type 2 diabetes,.
The blockbuster and highlight of the Merck stable, Singulair for the treatment of chronic asthma and allergic rhinitis, added to earnings by recording strong sales growth of 25%, reaching $1 billion for the quarter. Combined global sales of Zetin and Vytorin, as reported by the Merck/Schering-Plough partnership, reached $1.2 billion, representing growth of 47%, although the results are recorded in equity income from affiliates.
Also helping Merck obtain double-digit earnings were the angiotensin receptor blockers, Cozar and Hyzaar, with combined sales of $798 million, an increase of 14%. While total vaccine sales were $903 million compared to $272 million last year, led by solid performance by Gardasil at $365 million, and Rotateq at $85 million. Revenues from Fosamax and Fosamax Plus D were less solid, falling by 2% from the previous year to $742 million.
Merck said it expects to report second-quarter earnings of 62 to 68 cents a share, down from 69 cents a year ago on revenue similar to the first quarter.