Pharmaceutical Shares Have an Adverse Reaction

Merck & Co.’s shares plunged Tuesday after the drug maker reported second-quarter earnings slightly below expectations and lowered its profit expectations for the year.

Stocks of other pharmaceutical companies followed Merck down even though some of them reported earnings at or above Wall Street forecasts.

Merck said its earnings rose 15% in the latest quarter to $1.32 billion, or $1.07 a diluted share, a penny under the consensus earnings estimate of analysts polled by First Call. Sales rose 9.5% to $6.47 billion.

But Merck told analysts in a conference call that earnings for the year will probably be at the low end of Wall Street forecasts. Analysts expect the company to earn $4.27 to $4.40 per diluted share this year, compared with $3.74 a share last year.

Earnings at SmithKline Beecham also disappointed investors, but Schering-Plough Corp. slightly beat analysts’ early expectations, and American Home Products Corp. and Bristol-Myers Squibb Co. matched forecasts.

Schering’s stock had already been boosted after the company told analysts earlier this month it would slightly beat forecasts.

Shares of all five drug makers skidded on the New York Stock Exchange, led by Merck, down $9.81, or 7%, to $128.56.

Some analysts have grown increasingly concerned about Merck’s earnings as its lucrative cholesterol-lowering drugs, the older Mevacor and the newer Zocor, have lost market share, sliding from about 50% a year ago to about 30% now.

Meanwhile, Schering-Plough reported a 22% gain in profit to $455 million, or 61 cents a share. Sales jumped 23% to $2.12 billion, with particular strength from its allergy treatment Claritin.

Analysts had originally expected a profit of 60 cents, but adjusted their expectations after Schering disclosed some earnings figures on July 1.

The company said on July 8 that it expected second-quarter profit of 61 cents a share, beating by a penny the then-current average estimate of analysts polled by IBES International Inc.

American Home Products, whose products include Advil painkiller and Centrum vitamins, said its net income rose 14% to $523.5 million, or 39 cents a share. Sales fell 4.6% to $3.34 billion.

Bristol-Myers Squibb, the world’s largest maker of cancer drugs, said second-quarter profit rose 13% to $835 million, or 82 cents a share, on higher sales of medicines such as cholesterol-reducer Pravachol and diabetes drug Glucophage.

Bristol-Myers, which also makes Clairol hair products and Excedrin painkiller, said sales rose 9% to $4.4 billion.

Britain’s SmithKline Beecham, lagging its American counterparts, said its profit rose a less-than-expected 5% to about $383 million, or 35 cents a share, blaming foreign exchange rates and difficult international markets. Sales grew 3.5% to $3.2 billion.

On Wall Street, American Home Products fell $2.13 to $50.69, Bristol-Myers fell $5.88 to $119.94, and Schering was off $3.19 to $99.75. SmithKline’s U.S. listed shares fell $4 to $59.56.

*

Associated Press and Bloomberg News were used in compiling this report.