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Despite Actions on Vioxx, Merck Ekes Out Profit Gain MARKETPLACE By Bloomberg

Posted on: Wednesday, 1 February 2006, 09:00 CST

By Angela Zimm

Merck said Tuesday that fourth-quarter profit rose 1.7 percent because of cost-cutting as sales barely improved and the company added $295 million to legal reserves related to Vioxx painkiller lawsuits. Net income rose to $1.12 billion from $1.1 billion a year earlier, when the recall of the Vioxx pain drug reduced quarterly sales by as much as $750 million, the company said. Revenue edged up to $5.77 billion from $5.75 billion.

Sales of Merck's best-selling drug, Zocor for cholesterol, fell 18 percent from a year earlier because of competition from generics, the company said. The added reserves brought the total set aside for Vioxx-related complaints to $970 million, $285 million of which has already been spent. Merck is cutting jobs and closing plants to save $5 billion in four years.

Merck still faces 9,650 lawsuits regarding people who allegedly were harmed by Vioxx, which was withdrawn in 2004 after studies showed an increased risk of heart attacks in some long-term users. Shares of Merck rose 4 cents to close at $34.50 in New York.

Merck is building up its vaccine business to revive sales and profit. The company said it expected to introduce this year its Gardasil inoculation against the virus that causes cervical cancer. Analysts have estimated that annual sales may reach $3 billion.

Merck also expects to introduce vaccines against rotavirus, the most common cause of diarrhea in children, and shingles, a painful rash caused by the chickenpox virus. The company is in the process of eliminating 7,000 jobs and closing five plants. Fourth-quarter sales of Zocor declined to $1.1 billion. For all of last year, demand for the product fell 16 percent, to $4.4 billion. Zocor prescriptions are falling because the drug has lost patent protection in some European countries, according to Tony Butler, an analyst with Lehman Brothers.

Sales of Pfizer's competing cholesterol drug, Lipitor, rose 3 percent in the fourth quarter and reached $12.2 billion for all of last year. Revenue from Merck's second-biggest seller, the Fosamax osteoporosis pill, fell 5 percent, to $789 million. Cozaar, for hypertension, generated $782 million, an increase of 2 percent from a year earlier. Sales of the cholesterol treatment Vytorin, which the company markets with Schering-Plough, were $355 million. Vytorin combines Zocor with Schering's Zetia cholesterol drug. Separately, Wyeth posted a fourth-quarter profit on higher sales of its Prevnar meningitis vaccine and Enbrel arthritis treatment. But the stock fell 68 cents to close at $46.25 as sales of its Effexor antidepressant missed most analysts' estimates. Net income was $731.7 million, reversing a loss of $1.76 billion a year earlier. Wyeth had legal expenses in the fourth quarter of 2004 related to the fen-phen diet drug combination. Sales rose 2.1 percent, to $4.75 billion.

Sales of Effexor, which is the company's best-selling product, dropped 1 percent, to $841 million.

Source: International Herald Tribune

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