Merck profit dives on weaker sales, restructuring costs
Drug giant Merck posted Monday a 35 percent drop in third-quarter profit on weaker sales and higher restructuring costs as it struggles with the loss of exclusivity on key drugs.
Net income was $1.12 billion in the third quarter, down from $1.73 billion in the year-ago quarter.
Though the company sharply cut spending on research and development, and on marketing, restructuring costs jumped eightfold from a year ago, to $870 million.
Third-quarter earnings per share were 38 cents, down from 56 cents a year earlier.
Adjusted earnings of 92 cents per share were down three cents from a year earlier, beating the average analyst estimate of 88 cents.
Revenue fell 4 percent from the 2012 third quarter to $11.0 billion, missing Wall Street forecasts of $11.1 billion. The decline included a 2 percent negative currency impact.
Merck's results were especially weighed down by the loss of exclusivity for its allergy and asthma drug Singular, which suffered a 53 percent plunge in worldwide sales to $280 million. The patents for the drug expired in the United States in August 2012 and expired in major European markets in February 2013.
Merck, known as MSD outside the United States and Canada, has been under pressure after the expiration of some drug patents and is in the process of streamlining its operations and refocusing strategy on its most profitable growth markets.
The company announced on October 1 it would cut 8,500 jobs worldwide as it seeks to generate savings of $2.5 billion by the end of 2015 from 2012 levels.
The new job cuts, combined with previously announced cuts of about 7,500, will slash 20 percent of the current global workforce of 81,000 by end-2015.
"This quarter we delivered solid financial results, with strong contributions from our vaccine, immunology and HIV businesses, and effective cost management," said Kenneth Frazier, Merck chairman and chief executive.
"We are improving productivity and focusing our R&D and commercial resources more precisely to enable our investments in the best opportunities for innovation and growth."
The Whitehouse Station, New Jersey-based company narrowed its 2013 full-year forecast to adjusted earnings per share in a range between $3.48 and $3.52, compared with the prior forecast of $3.45 to $3.55, and reaffirmed its outlook for sales to fall about 5 to 6 percent from 2012.
Merck shares were down 2.5 percent to $45.40 in mid-morning trade.