Merck's earnings miss slightly but it was not the 'mega-miss' some anticipated

Merck CEO Kenneth Frazier

Merck ($MRK) has been preparing for 2014 to be a tough year, and top execs said Wednesday there is no doubt that it will be. The New Jersey company's sales continue to get whacked by the loss of patent protection for its asthma blockbuster Singulair, but it managed to pull out fourth-quarter earnings that only barely missed Wall Street expectations, avoiding the "mega-miss" some analysts were braced for.

The company's forecast earnings for 2014 are $3.35 to $3.53 per share, when special costs are factored out. The average analyst estimate, Reuters reports, was $3.48 per share. The company said it expects AstraZeneca ($AZN) to end the joint venture the two have had to sell stomach drugs Prilosec and Nexium this year, so it will not be booking sales for those drugs in the second half of the year. To prepare for the hardships in 2014, the company launched a plan in October to cut 8,500 positions worldwide and $2.5 billion by 2015, a number executives said today they are pretty sure it will reach.

Merck also continues to analyze how to get more out of its animal-health and consumer-health operations, both of which turned in lower earnings for the year. Suitors are rumored to be sizing up its consumer health business; a sale might bring $10 billion. Merck and Novartis ($NVS) have also been reported to be looking at a potential swap in which Novartis would trade its animal-health and vaccines units for Merck's consumer-health business.

CEO Ken Frazier told analysts that nothing has been decided and in response to questions reiterated his fondness for the animal-health division. "We have always viewed it as good business, an industry leader, second largest in the industry, with good margins," he said during the company's earnings call. "The question is what are the alternatives that make it more valuable over the longer term."

The company had some pipeline setbacks last year, but its shares today were up nearly 2% in midmorning trading. Analysts pegged that to expectations for Merck's MK-3475 drug candidate, a so-called PD-1 inhibitor that works by using the immune system to locate and kill cancer cells. It is thought to have blockbuster potential, but Merck is working with Pfizer ($PFE) and Incyte ($INCY) on that product, Bloomberg points out. Executives refused to say what the financial division for the drug might be.

Pharma sales last year slid 5% to $44 billion when adjusted for foreign currency issues, as Singulair saw a spectacular retreat. Full-year global sales for the drug were down 66% to $1.2 billion. The patent for the asthma drug expired in the U.S. in August 2012 and in major European markets in February 2013. Sales of diabetes drug Januvia also fell 2% for the year to $4 billion, while sales of its cholesterol-lowering drugs, Zetia and Vytorin, were flat for the year but grew in the fourth quarter. Remicade and Simponi, which are used for treating inflammatory diseases, grew 19% for the fourth quarter and 15% for the year.

- here's the release
- read the Reuters story
- get more from Bloomberg

Related Articles:
Merck CEO: We'll decide fate of animal health, consumer biz by year's end
Suitors size up Merck's consumer unit for potential $10B deal: Reuters
Merck, AstraZeneca rejig stomach-drug partnership
Wanna trade? Novartis and Merck are reportedly negotiating a $5B unit swap

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