Updated from 3:57 p.m. EDT

A profit affirmation by drug giant

Merck

(MRK) - Get Report

wasn't enough to rescue its shares from pessimism created by an analyst downgrade Wednesday.

The Whitehouse Station, N.J.-based issued a press release before the close saying it expects to earn between 81 cents and 85 cents a share in the third quarter, in line with analyst views. The company also sees double-digit growth in its core pharmaceuticals business next year.

While the shares briefly turned positive on the news they couldn't hold the gain and ended down 37 cents at $45.63. The shares touched a low of $43.35. Ironically, it was a Raymond James' analyst's prediction that the company would have to issue an earnings warning by early December that created the initial downward pressure in the stock.

Raymond James Analyst Michael Krensavage dropped his rating on Merck's shares to market perform from strong buy and said he now expects the company to earn $3.05 a share in 2003. His previous estimate was for earnings of $3.35 a share; the FirstCall consensus is $3.37. Krensavage cited a slowdown in sales of the company's Vioxx arthritis drug and competition concerns.

In its release, Merck said it expects full-year 2002 earnings to be unchanged from the $3.14 a share it earned in 2001; analysts were predicting $3.13 a share. The current year's results will include a gain from the implementation of a change in accounting for goodwill.

The company expects earnings in its core pharmaceuticals operations to rise by more than 10% in 2002. Merck is trying to sell its Medco pharmacy benefits unit via an initial offering but has had to delay the deal because of the weak stock market.