Updated from 7:56 a.m. EDTA strong second-quarter performance has encouraged Merck ( MRK) to raise its full-year earnings projection for the second time this year. The drugmaker said Monday that its full-year earnings should be in the range of $2.40 to $2.48 a share, up from a range of $2.32 to $2.40. The average Wall Street estimate is $2.40. Merck's prediction excludes one-time items and the cost of establishing reserves for potential liabilities from lawsuits against the arthritis drug Vioxx. Three months ago, Merck raised the full-year forecast to a range of $2.32 to $2.40 from a prediction of $2.28 to $2.36, thanks to a first-quarter performance that beat estimates by 8 cents a share. For the second quarter, Merck's EPS, excluding one-time items, was 73 cents, or 8 cents better than the consensus of analysts polled by Thomson First Call. Revenue of $5.77 billion beat the average estimate of $5.46 billion. "The results demonstrate that we can deliver growth while we make the fundamental changes necessary to return Merck to an industry leadership position," said Richard Clark, the chief executive. For Merck's stock, the news was good enough to lift it to its best level since September 2004, in the days before it pulled Vioxx from the market. Lately, its shares were up $1.39, or 3.7%, to $38.75. On a GAAP basis, Merck earned $1.5 billion, or 69 cents a share, for the three months ended June 30. For the same period last year, Merck earned $720.6 million, or 33 cents a share, on sales of $5.47 billion. Analysts continue to forecast a big dropoff in Merck's profit and sales for the third and fourth quarters because the cholesterol drug Zocor has lost its U.S. patent protection. Last year, Zocor contributed $4.38 billion in sales, but this year Merck is predicting only $2.6 billion to $2.9 billion.
Worldwide sales for Zocor in the second quarter of $990 million declined 14% from the same period last year. For the first six months, sales fell 9% to $2.1 billion. Judy Lewent, Merck's chief financial officer, said the uncertainty surrounding Zocor is the reason why Merck didn't provide third-quarter guidance. Vioxx was a relative nonevent during the quarter. Merck hasn't taken any reserves for potential litigation liabilities, and it didn't add to its previous outlays that are devoted solely to defending the drug in court. When Merck took Vioxx off the market nearly two years ago, it said a clinical trial showed the drug caused an elevated risk of cardiovascular problems in people who took it for more than 18 months. As of June 30, Merck says it has been named as a defendant in about 14,200 personal-injury lawsuits in the U.S., as well as some 190 purported class actions.
In the cases that have gone to trial , Merck has won four verdicts and lost three. The company is appealing the losses. Among other big products, Merck said the asthma drug Singulair posted worldwide sales of $950 million, a 30% gain in the second quarter vs. the same period last year. Sales of the Cozaar and Hyzaar blood-pressure medications were flat at $784 million. Sales of the osteoporosis drugs Fosamax and Fosamax Plus D declined 4% to $821 million as generic competition in foreign markets offset an 8% gain in the U.S. In addition, vaccine sales rose 41% to $349 million. Merck also enjoyed a big improvement in its joint venture with Schering-Plough ( SGP). The companies comarket Schering-Plough's cholesterol drug Zetia, as well as Vytorin, which combines Zetia and Zocor. Second-quarter sales jumped to $973 million from $507 million a year ago. Zetia accounted for $476 million and Vytorin contributed $497 million.
Merck records these results with several other joint ventures.
Schering-Plough's quarterly financial report assumes a 50/50 revenue split between the companies. Vytorin and Zetia contributed to a better-than-expected quarter for Schering-Plough, whose stock was up $1.01, or 5.2%, to $20.46. The next six months will provide an important sales signal as Merck rolls out several new products in the U.S. and awaits rulings from the Food and Drug Administration on others. Merck has begun selling Rotateq , a vaccine to protect children against a virus that causes gastroenteritis, and Gardasil, a vaccine that protects women against human papillomavirus, a cause of cervical cancer . Last month, Merck begin selling Zostavax, a vaccine to prevent shingles in people 60 and older. In October, Merck expects to hear from the FDA on Januvia , a treatment for diabetes that many analysts say could be a big seller, and Zolinza, for people with a type of non-Hodgkins lymphoma, a cancer of the lymphatic system.