Friday, Jul. 29, 2016

Merck puts up strong 2Q numbers, but choppy water ahead

By By LINDA A. JOHNSON

Merck & Co. lowered its financial forecasts for 2016, citing higher restructuring and other costs, despite a big jump in second-quarter profit.

The drugmaker is transitioning to what it hopes is a new cycle of growth fueled by promising new drugs as it continues to cut costs to offset the impact of increased competition for its best sellers. That's reducing sales or slowing growth.

However, its new drugs in the hot categories of hepatitis C and immune system-boosting cancer drugs are trailing those of rivals dominating those markets.

The Kenilworth, New Jersey, company on Friday reported a 75 percent jump in second-quarter net income. It edged past Wall Street expectations for profit and it matched sales forecasts, as overall sales rose slightly.

Shares rose 87 cents, or 1.5 percent, to $59.30 in premarket trading.

Merck posted net income of $1.21 billion, or 43 cents per share, up from $687 million, or 24 cents per share, a year earlier. Earnings, adjusted for one-time costs related to mergers and acquisitions and restructuring costs, came to 93 cents per share.

The average estimate of nine analysts surveyed by Zacks Investment Research was for earnings of 92 cents per share.

The second-biggest U.S. drugmaker reported revenue of $9.84 billion in the period, up 1 percent.

Merck said it now expects full-year earnings in the range of $1.98 to $2.08 per share, excluding one-time items. That's down from its May forecast of $1.96 to $2.23.

It expects adjusted 2016 earnings of $3.67 to $3.77 per share, a tighter range than the $3.65 to $3.77 per share it forecast in the spring, and revenue of $39.1 billion to $40.1 billion.

"We remain committed to advancing our pipeline, delivering a balanced and differentiated portfolio, and achieving long-term sustainable growth," CEO Kenneth Frazier said in a statement.

The company said the strong dollar reduced sales by 2 percent, though those negative effects declined from recent years.

The maker of Type 2 diabetes pill Januvia and cholesterol drugs Zetia and Vytorin said sales of its prescription drugs increased 2 percent in the quarter, to $8.7 billion. Januvia, Merck's top seller, only rose 2 percent, to $1.06 billion, while sales declined significantly for Vytorin, HIV drug Isentress, cancer vaccine Gardasil and immune disorder drug Remicade, which Merck sells outside the U.S.

Merck's two new potential blockbusters are slowly building sales, but lag far behind the category leaders.

Hepatitis C drug Zepatier, launched in January, posted sales of just $112 million. Merck is selling Zepatier at a big discount to entrenched leader Gilead Sciences Inc.'s Harvoni and Sovaldi, which are bringing in billions each quarter, to try to grab market share.

Keytruda, Merck's immuno-oncolgy drug, which fights several cancers by boosting the immune system, had sales of $314, triple its sales a year ago, but market leader Bristol-Myers Squibb reported combined sales of nearly $1.1 billion for its Opdivo and Yervoy.

Sales of veterinary medicines rose 7 percent in the quarter, to $898 million.

Merck shares have risen 11 percent since the beginning of the year, while the Standard & Poor's 500 index has risen 6 percent.

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Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on MRK at http://www.zacks.com/ap/MRK

2016-07-29 12:07:42 GMT

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