Merck increases net income 7 percent
WHITEHOUSE STATION, N.J. (AP) – Pharmaceuticals giant Merck & Co. reported a 7 percent jump in second-quarter net income as increased sales offset higher spending on marketing and research. The results, announced Monday, missed analysts’ forecast by a penny. Merck shares were down $1.95 to close at $59.82 on the New York Stock Exchange.
The maker of arthritis drug Vioxx and the cholesterol drug Zocor reported net income of $1.87 billion, or 83 cents per share. A year ago, Merck posted net income of $1.75 billion, or 77 cents per share.
Analysts polled by Thomson First Call expected 84 cents per share.
Total revenues increased 4 percent, to $13.3 billion from $12.8 billion a year earlier. Of that, $5.53 billion came from the pharmaceuticals business and $8.4 billion came from Merck’s prescription benefit management subsidiary, Medco Health Solutions Inc.
Medco processed 131 million prescriptions, which was down slightly because of lost account volume, Mark Stejbach, director of investor relations, told analysts during a conference call.
He said Merck still plans to spin off the Medco subsidiary to stockholders in the third quarter of this year. It has a much lower profit margin than the pharmaceuticals business, earning only $105.2 million in net income for the quarter, compared with $1.8 billion in net income for the pharmaceutical segment.
Merck’s top six drugs – Zocor, Fosamax for osteoporosis, the related blood pressure drugs Cozaar and Hyzaar, Vioxx and the asthma-controlling pills Singulair – together saw sales rise 7 percent and accounted for 64 percent of total pharmaceutical sales. However, those revenues were boosted 5 percentage points by the impact of favorable currency exchange rates.
Merck forecast that the six blockbusters would bring in a total of $15.1 billion to $16.3 billion in sales for all of 2003.
The company cut its tax rate to 28.1 percent, from 30 percent in the second quarter of 2002, but marketing and administrative expenses increased 18 percent to $1.75 billion, mainly because of expansion of the pharmaceutical sales force completed last year. Likewise, research and development costs jumped 25 percent to $76.4 million.
For the first six months, net income increased 6 percent to $3.58 billion, or $1.58 per share, from $3.38 billion, or $1.47 per share, in the first quarter of 2002. First-half revenues totaled $26.67 billion, up 7 percent from $24.98 billion a year earlier.
Merck said in a statement that it expects to generate $3.40 to $3.47 in earnings per share for the full year; analysts are forecasting $3.41 for the year.
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