Updated from 7:55 a.m. EDT
second-quarter results easily beat Wall Street's estimates and the drugmaker dramatically raised its full-year targets, giving its shares a boost Monday.
New Jersey-based Merck boosted its 2007 earnings forecast to a range of $3 to $3.10 a share, excluding one-time charges, up from a projection of $2.75 to $2.85 announced in April. As recently as December, Merck was predicting only $2.51 to $2.59 a share.
Analysts polled by Thomson First Call had been expecting full-year earnings $2.93 a share, excluding items. Following the new range, shares of Merck jumped $3.43, or 7%, to $52.45 on heavier-than-average trading.
For the three months ended June 30, Merck earned 82 cents a share, excluding one-time charges, beating the consensus by 10 cents. Sales of $6.1 billion topped the mean estimate of $5.77 billion.
Once all items were counted, Merck earned $1.68 billion, or 77 cents a share, up from last year's profit of $1.5 billion, or 69 cents a share, on revenue of $5.77 billion. Charges in the second quarter related primarily to cutting payroll and closing plants.
"A broad range of our newer and established products delivered strong growth again during the second quarter," said Richard Clark, Merck's chairman and CEO. "Our overall performance has positioned us well to achieve our business targets, meet the challenges that lie ahead, and continue to invest in drug discovery."
Sales of vaccines jumped to $1 billion from $349 million for the year-ago quarter thanks to strong sales from new products, especially Gardasil, which prevents a virus that causes cervical cancer, and Rotateq, which protects children from a vicious gastrointestinal disease. Gardasil contributed $358 million in the second quarter, and Rotateq accounted for $119 million.
Januvia, a new drug for diabetes, produced sales of $144 million for the second quarter. Janumet, which combines Januvia and the generic blood-sugar control drug metformin, added $24 million.
Among large, veteran products, the asthma drug Singulair gained 15% to $1.1 billion in sales, and revenue from the blood-pressure medications Cozaar and Hyzaar rose 8% to $847 million. The Fosamax family of osteoporosis drugs saw sales decline 4% to $786 million.
Along with raising its overall outlook, Merck lifted its full-year sales estimates for vaccines, Singulair, Cozaar/Hyzaar and the Fosamax family.
Merck said its cholesterol-drug joint venture with
produced a combined 30% year-over-year sales gain to $1.3 billion. The venture sells Schering-Plough's Zetia as well as Vytorin, which combines Zetia and Merck's Zocor. Merck said Zetia's worldwide sales rose 21%, while Vytorin's sales climbed 38%.
Merck also added $210 million in reserves for its legal defense of Vioxx, which it pulled from the market in September 2004 after clinical trials showed a heightened risk of cardiovascular problems. The reserve, which doesn't cover adverse judgments, now stands at $810 million.
The company spent $137 million on Vioxx defense costs during the second quarter. Company executives told analysts they cannot predict Vioxx-related costs beyond 2008. As of June 30, Merck was a defendant in nearly 27,000 U.S. personal injury suits, as well as 266 class-action suits alleging personal injury or economic harm.
Merck's solid performance comes just a week after rival
posted its latest disappointing quarter, as the New York drugmaker struggles with its own restructuring.