Merck predicts higher profit
Merck & Co. expects slightly higher profit in 2007 on sales growth from newer drugs and product launches, including a successor to the withdrawn painkiller Vioxx, the company said Wednesday.
The Whitehouse Station, N.J.-based company reiterated its earnings forecast for 2006: $2.18 to $2.25 a share, or $2.48 to $2.52 excluding charges for facility closures and severance pay under a restructuring program that has eliminated 3,900 of the 7,000 jobs to be cut by the company.
For next year, Merck expects higher earnings per share of $2.36 to $2.49, or $2.51 to $2.59 excluding restructuring charges.
Both forecasts were in line with the expectations of analysts surveyed by Thomson Financial. Their current projections, excluding one-time charges, average $2.51 a share for 2006 and $2.56 for 2007.
Shares of Merck fell 34 cents to $44.67 on Wednesday. The 52-week high is $46.37.
Several analysts said that the shares probably fell because traders were hoping for a better forecast, but that Merck deliberately gave a conservative one.
“Last year, Merck raised guidance three times and has handsomely executed on a strategy to, in our opinion, understate and over-perform. We expect the same thing this year,” Deutsche Bank North America analyst Barbara Ryan noted in a report.
Analyst Steve Brozak of WBB Securities said that if big pharmaceutical companiesdidn’t meet profit expectations these days, investors were punishing them.
Merck Chief Executive Richard T. Clark told analysts during a conference call that between the restructuring and efforts to hold down overhead and speed the time it takes to bring new drugs to market, Merck was on track to produce total pretax savings of $4.5 billion to $5 billion from this year through 2010.
“We are making solid progress toward many of our stated long-term targets,” Clark said.
Merck also predicted revenue growth of 4% to 6% year over year through 2010 and double-digit percentage growth in earnings per share through that period, excluding one-time items. The company booked revenue of $22.01 billion in 2005 and $16.6 billion for the first nine months of this year, up 2% from the same period last year.
All of the forecasts exclude the potential need to pay jury awards and settlements relating to Vioxx, which Merck pulled from the market in September 2004 after its research showed that the drug doubled the risk of heart attacks and strokes.
Merck faces more than 24,000 personal injury lawsuits over Vioxx, plus other litigation, and has reserved nearly $1.6 billion for its legal defense costs.
Merck expects to launch next year Arcoxia, a painkiller in the same class as Vioxx that already is on sale in other countries.
