Drugmaker Merck posts slight rise in 3Q sales, but big profit jump due to animal health sale

Merck posts big profit jump, slight rise in sales

TRENTON, N.J. — Drugmaker Merck & Co. on Thursday posted a bigger profit in the third quarter due to slightly higher sales and a huge gain from selling a business.

The maker of cholesterol drugs, vaccines and asthma and allergy treatment Singulair said net income was $3.42 billion, more than triple the $1.09 billion it made a year earlier.

That’s mostly due to Merck having to sell its half of the Merial animal health business so that regulators would approve its plan to buy New Jersey neighbor Schering-Plough Corp.

That sale brought in $2.8 billion, or $1.7 billion after taxes. Without it, profit would have been up roughly 58 percent from the 2008 third quarter.

Whitehouse Station, N.J.-based Merck is about to leapfrog from No. 8 to No. 2 in the pharmaceutical industry with its pending $41.1 billion acquisition of Schering-Plough. That will put it right behind Pfizer Inc., which last week bought Wyeth for $68 billion.

“We have made significant progress in our planning the past three months” for the merger, Chief Executive Richard Clark told analysts during a conference call. “We will be ready to hit the ground running on our first day of business as the new Merck.”

For the third quarter, Merck posted a 2 percent increase in revenue, to $6.05 billion.

It had earnings per share of $1.61, or 90 cents excluding the big gain from Merial. That beat analysts’ conservative expectations for earnings per share of 82 cents without items and revenue of $6 billion.

Its diabetes drugs, Januvia and Janumet, saw big jumps, bringing in a combined $664 million, and Januvia was recently approved in China. Sales of Merck’s top drug, Singulair, increased 5 percent to $1.1 billion. HIV drug Isentress was up 84 percent to $197 million, but sales of osteoporosis blockbuster Fosamax, which now has generic competition, fell 22 percent to $276 million.

Gardasil, a vaccine against a virus that causes cervical cancer and genital warts, had a 22 percent drop in sales to $311 million. Gardasil got off to a strong start when it was launched three years ago, but has seen sales slump this year and took two potential blows to sales in the last week.

Last Friday, GlaxoSmithKline PLC’s rival HPV vaccine, Cervarix, got approved by the Food and Drug Administration. Then on Wednesday, the influential U.S. Advisory Committee on Immunization Practices decided not to recommend routine vaccination of boys to prevent them from getting genital warts or infecting girls with HPV. That’s despite the FDA approving Gardasil for boys a week ago.

Meanwhile, concerns about the swine flu epidemic have boosted sales of another Merck vaccine, Pneumovax, which protects against 23 strains of pneumococcal disease that can cause pneumonia. Sales are up about 80 percent from a year ago, to $130 million, as government agencies have been buying the vaccine and health officials push steps to prevent pneumonia, a common flu complication that can be deadly.

Merck and Schering-Plough have been partners for several years on the cholesterol drugs Vytorin and Zetia, but their once-surging sales have been declining steadily since January 2008. That’s when reports began surfacing that question whether they work any better than a much-cheaper generic cholesterol pill. In the third quarter, their combined sales fell nearly 7 percent, to $1.03 billion.

That partnership made their combination a natural. In addition, Merck really needed Schering-Plough’s much stronger stable of experimental drugs in development.

And as Pfizer has just done, Merck is looking to diversify beyond its strength in vaccines and traditional pills. Buying Schering-Plough gives it a strong biotech operation, more veterinary medicines and a host of well-known consumer health products such as the Coppertone sun care and Dr. Scholl’s foot care lines.

Clark said the combined company will be focused on health care reform, “anticipating customer needs” and growth areas including emerging markets, biotech drugs and vaccines.

Merck has suffered some setbacks with experimental drugs, including a September announcement it will stop developing a potential treatment for acute migraines, MK-3207, because of potential liver problems.

But late in September, Merck entered an exclusive deal with Australian flu vaccine maker CSL Biotherapies to distribute its Afluria seasonal flu shot in the U.S. starting next fall. The deal pays Merck based on how many Afluria doses it distributes and runs through the 2015-16 flu season.

In morning trading, Merck shares fell 38 cents to $32.30.