Merck to Miss Lowered Forecasts
The withdrawal of painkiller Vioxx means Merck & Co. will miss the already diminished expectations of Wall Street analysts for 2005, the drug maker said Wednesday.
But its shares rose nearly 3% as the company said it planned to continue its stock buyback program in 2005, offered an upbeat outlook for two new cholesterol drugs and said it planned to seek government approval of three vaccines next year.
Merck said it expected to earn $2.42 to $2.52 a share in 2005. Analysts surveyed by Thomson First Call had expected earnings of $2.56 a share, down one-fifth in the last month. Merck took Vioxx off the market Sept. 30.
Investment firm Oppenheimer said in a research note that although the 2005 earnings projection was lower than Wall Street expected, “the company seems to have avoided the worst-case scenario.” Deutsche Bank said in a separate note that “the shares are oversold at the current multiple and the dividend is secure” with a hefty 5.4% yield.
Merck again noted that the Vioxx withdrawal would drop fourth-quarter profit by 50 cents to 55 cents and leave the company with a profit of $2.59 to $2.64 for 2004. Analysts are looking for earnings per share of 50 cents for the fourth quarter and $2.61 for the year.
The Whitehouse Station, N.J.-based company said it expected continued growth in sales of two of its newer drugs, cholesterol reducers Zetia and Vytorin, which are products of a joint venture with Schering-Plough Corp. Vytorin combines Zetia with Zocor, Merck’s top-selling drug. Zocor’s patent expires in spring 2006.
Merck also said it planned to submit three vaccines for approval by the Food and Drug Administration in the second half of 2005.
Merck pulled Vioxx, used for arthritis and acute pain, from the market after a company study showed the drug doubled the risk of heart attacks and strokes. About 2 million people worldwide were taking Vioxx, which had been Merck’s No. 2 drug with projected 2004 global sales of $2.5 billion. That was 11% of the company’s $22.49 billion in revenue last year.
The announcement Wednesday did not reflect any reserves established for any Vioxx payouts stemming from a deluge of lawsuits from patients and shareholders. Industry analysts have estimated the liabilities at as much as $18 billion.
“Basically, the bottom line is that their bottom line, aside from Vioxx, is going to be fine,” independent pharmaceuticals analyst Hemant Shah of HKS & Co. said. “Fundamentally, Merck is undervalued at these levels. The only problem is that how do you quantify the legal liability at this time?”
Merck shares rose 80 cents to $28.69 on the New York Stock Exchange. Shares traded for about $45 before the Vioxx recall.
