Merck Moves Fall Flat
The third Vioxx trial starts Tuesday in a federal courthouse in Houston. Merck lost a state-court case in Texas in August and won a state-court case in New Jersey in early November. As of Sept. 30, Merck said more than 6,400 U.S. lawsuits had been filed claiming Vioxx had caused an injury or a death.
For 2006, Merck expects to earn $2.28 to $2.36 a share, excluding restructuring charges, but including an expense of 7 cents for expensing stock options. The estimates exclude potential Vioxx liability reserves. The consensus forecast is $2.38 a share.
When calculated using generally accepted accounting principles, Merck predicts 2005 earnings of $2.04 to $2.10 and a 2006 profit of $1.98 to $2.12.
The company said its manufacturing overhaul should enable gross profit margins after 2008 to return to the level seen before the loss of Zocor's U.S. market exclusivity. The cholesterol drug, which has been losing patent protection in some foreign markets, will be hit by generics in the U.S. in June.Zocor had $5.2 billion in worldwide sales last year. Merck expects sales to be $4.2 billion to $4.5 billion this year, before falling to $2.3 billion to $2.6 billion in 2006.
The New PlanThe new manufacturing plan will cost $350 million to $400 million this year and $800 million to $1 billion next year. Through the end of 2008, Merck sees cumulative pretax costs of $1.8 billion to $2.2 billion, with about70% being noncash expenses related to accelerated depreciation of the closed plants. Barbara Ryan, of Deutsche Bank Securities, says the Merck restructuring appears to be less aggressive than the plan at Pfizer (PFE). She doesn't own shares, but her firm says it does and seeks to do business with companies mentioned in research reports. Pfizer has said it wants to
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