Merck Plunges After 2002 Earnings Warning

Merck(MRK Quote) offered a glum earnings forecast for next year as the drug giant gets hit with key patent expirations.

Merck said 2002 earnings will be flat compared with 2001, but offered no specific numbers. The company is expected to earn $3.14 per share this year, according to consensus figures compiled by Thomson Financial/First Call.

Wall Street was looking for 2002 earnings of $3.40 per share.

Shares of Merck plunged $6.39, or 9.5%, to $60.60 per share after the earnings warning was announced around 3:20 p.m. EST.

Merck used a meeting with Wall Street analysts Tuesday to announce the bad news. The company blames flat 2002 earnings on expirations on patents for the heartburn drug Prilosec.

"This 2002 guidance is not at the level that we would have liked to deliver," said Judy Lewent, Merck's CFO, in a statement. "As we complete this transition in 2002, we expect to deliver double-digit earnings per share growth in 2003."

The transition Lewent refers to is a marked acceleration in new drugs coming out of the company's research labs. Merck says it plans to seek approval for 11 new drugs by 2006.

One of these drugs is Zetia, a new cholesterol fighter that should be filed with the Food and Drug Administration in the first quarter of next year. Zetia is being codeveloped by Schering-Plough(SGP Quote).