Drugmaker Merck & Co. easily beat Wall Street expectations, sending its shares up sharply, despite first-quarter profit plunging 44 per cent. Income was hurt by the sale of its consumer health business, unfavourable currency exchange rates and competition to some drugs.
The maker of Type 2 diabetes pills Januvia and Janumet on Tuesday nudged up its profit forecast for the year, citing continuing cost reductions and launches of important new drugs. Those include its immune-boosting melanoma drug Keytruda, which also is being tested in thousands of patients for lung cancer and many other types of cancer.
In midday trading, its shares were up $2.86, or 5 per cent — an unusually high increase for a major drugmaker — at $59.96.
Analyst expectations have been muted for multinational companies because that the strong dollar reduces the values of products sold in local currencies around the world. While Merck’s prescription drug sales jumped 16 per cent in the U.S. in the quarter, they were down sharply in the huge Europe and Japan markets and some other regions.
The company noted unfavourable currency-exchange rates reduced total sales by 5 per cent, and the sale of the consumer business to Bayer Healthcare cut sales by 8 per cent.
The world’s fifth-biggest drugmaker said its net income was $953 million, or 33 cents per share, down from $1.71 billion, or 57 cents per share, a year earlier.
Adjusted for one-time gains and costs, adjusted income was $2.43 billion, or 85 cents per share. Analysts surveyed by Zacks Investment Research expected earnings of 75 cents per share.
Merck, based in Kenilworth, New Jersey, brought in $9.43 billion in revenue, surpassing Wall Street forecasts for $8.98 billion.
“Overall, a solid Q1 with raised guidance,” Sanford C. Bernstein analyst Tim Anderson wrote to investors, noting that of pharmaceutical companies reporting results so far, only Merck and Bristol-Myers Squibb Co. have raised their profit forecasts.
Prescription drug sales totalled $8.27 billion, led by Januvia and Januvet, up 4 per cent to $1.39 billion. Cholesterol pills Zetia and Vytorin were down 9 per cent to $887 million, mainly due to generic competition for Zetia in Canada, where its patent recently expired.
Sales of most of its vaccines were up strongly, as was HIV drug Isentress. That segment also was bolstered by Merck’s January purchase of intravenous antibiotic maker Cubist.
Merck’s once-strong hepatitis C franchise was hurt by competition from newer blockbuster drugs from Gilead Sciences Inc. — Sovaldi and Harvoni — and AbbVie Inc.’s Viekira Pak, which cure far more patients with the liver-destroying virus.
Their recent launches led Merck to stop promoting its Victrelis after barely three years on the market. However, Merck last week reported strong results for an experimental hepatitis pill combining new drugs grazoprevir and elbasvir. The company plans to apply by mid-year for U.S. approval.
Merck said it expects full-year earnings in the range of $3.35 to $3.48 per share, up from its January forecast of $3.32 to $3.47 per share. It forecast full-year revenue in the range of $38.3 billion to $39.8 billion.
“We are off to a promising start in 2015,” CEO Kenneth Frazier told analysts during a conference call, citing launches of new drugs, including Belsomra for insomnia.
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