It has been a roller-coaster ride of a year for Merck ($MRK), complete with M&A and corporate bloodletting intended to swing the company's numbers northward. Part of the drugmaker's turnaround plan could be paying off, as cost cuts delivered third-quarter earnings that beat analysts' expectations. But slumping sales of some of its standout products, and an ongoing slide in profits, signal more work to come.
Third-quarter net income dropped to $895 million from $1.12 billion last year, and Merck slashed its adjusted earnings forecast for the year to $3.46 to $3.50 a share from $3.43 to $3.53 a share. Global sales fell 4% to $10.6 billion, and pharmaceutical sales decreased 4% to $9.1 billion on the quarter, the drugmaker said in an earnings statement.
Generic competition for Singulair continues to take its toll, with the former megablockbuster a shadow of its former self. Gardasil turned in less-than-promising numbers; the HPV jab brought in $590 million during the third quarter, an 11% decrease year-over-year. Though the Januvia and Janumet franchise grew by 5% year-over-year, the $1.4 billion in quarterly sales was a decline compared with last quarter's $1.58 billion.
And then, there's the company's hep C franchise, which is struggling under the weight of Gilead Sciences' ($GILD) blockbuster Sovaldi. Merck in June shelled out $3.8 billion for Idenix Pharmaceuticals ($IDX) to get its hands on that company's three drugs to treat the virus, and is hard at work on a Sovaldi rival.
But it isn't all doom and gloom for the Whitehouse, NJ-based company. Merck is celebrating regulatory approvals for promising cancer therapy Keytruda. In September, the FDA greenlighted the drug for the treatment of melanoma, and on Monday Keytruda won the agency's "breakthrough" designation for advanced non-small cell lung cancer, moving the company one step closer to full regulatory approval for the product.
|Merck CEO Kenneth Frazier|
Meanwhile, Merck continues to forge ahead with deals, and with job cuts intended to pad its bottom line. In May, the drugmaker sold off its consumer health business to Bayer for $14.2 billion and inked a collaboration to develop cardio drugs through the deal. In July, the company laid off 600 sales reps, building on its previously-announced plan of laying off 8,500 workers to save $1 billion in R&D costs and other expenses.
"Last October, we launched a multiyear initiative to transform Merck and build a platform for sustained, future growth. One year later, we delivered solid third-quarter results and are making steady progress in our transformation, including divesting non-core assets, reducing our expense base and investing in our promising new product launches and pipeline," CEO Kenneth Frazier said in an earnings statement.
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