Merck & Co’s share price took a slight knocking yesterday after the high-profile withdrawal of its COX-2 inhibitor, Vioxx (rofecoxib) [[01/10/04a]], and a $640 million dollar tax charge – relating to the repatriation of $15 billion in overseas profits – conspired to result in a staggering 59% drop in second quarter profits to $721 million.
Total sales for the three-month period tumbled 9% to $5.5 billion. As a result of the withdrawal, the firm was no longer able to count on revenues from Vioxx, which topped $653 million in the second quarter of 2004 [[22/07/04d]]. However, the company notes that the loss of Vioxx was offset by other revenue growth of 2%.
Sales of the asthma and allergy drug, Singulair (montelukast), rose 14% to $730 million, helped along by the launch of a new indication in Europe, while the osteoporosis treatment, Fosamax (alendronate), climbed 8% to $853 million. The anti-hypertensives, Cozaar (losartan) and Hyzaar (losartan plus hydrochlorothiazide), were also up 8%, generating sales of some $785 million. Sales of the cholesterol-lowering drug, Zocor (simvastatin), dropped 16% during the quarter to $1.2 billion, due to generic competition around the world, a situation that can only get worse when Zocor comes off patent in the USA next year. Meanwhile, the company’s new COX-2 offering, Arcoxia (etoricoxib), reached $193 million in the second quarter. It has yet to win approval in the all-important US market [[20/06/05b]].
As of June 30, Merck said it had been served or is aware that it has been named as a defendant in approximately 4,100 lawsuits, which include approximately 7,500 plaintiff groups alleging personal injuries resulting from the use of Vioxx, and in approximately 120 class-actions lawsuits. The firm has so far established a reserve of $675 million solely for its future legal defense costs related to these suits.
New chief executive, Richard Clark, who replaced Raymond Gilmartin earlier this year [[06/05/05a]], said: “We must gain approval for and launch the four investigational vaccines in the pipeline, expeditiously file for and gain approval of the next wave of promising late-stage pipeline products, and increase efforts to reduce Merck’s cost structure over and above what has been achieved to date.”
Merck is expecting third-quarter earnings per share of $0.61 to $0.65 – versus $0.33 during the second quarter. On an annual basis, EPS is forecast to come in around the $2.44 to $2.52 range, excluding the second quarter tax charge.