Merck preps for merger with cost cuts, strategy

Cost-cutting saved the quarter at Merck--and with the Schering-Plough deal set to close by year's end, the restructuring has only just begun. Meanwhile, CEO Dick Clark (photo) is already talking about growth plans for Schering's consumer health business.

To be fair, Merck also benefited this quarter from strong sales of its asthma/allergy remedy Singulair and its diabetes drug Januvia. Singulair sales grew by 16 percent to $1.3 billion, and Januvia jumped by 38 percent to $462 million. Overall revenues came in at $5.9 billion, down 2 percent from the same period last year. Earnings dropped by 12 percent to $1.59 billion, or 74 cents per share; excluding items, EPS was 83 cents per share. That beat analysts' estimates of 77 cents, Bloomberg reported.

Merck is in the middle of a 7,000-job restructuring, with more job cuts to come once Schering is officially part of the company. Apparently, the current (and recent) job cuts were a big boost to this quarter's results. "The benefits of their restructuring programs are significant contributors," Deutsche Bank's Barbara Ryan told Bloomberg. "They've been doing a lot of restructuring so their gross profits were better than we'd forecast, though not dramatically so."

Besides job cuts, what's next for Merck? During yesterday's earnings call, Clark mused that the company will need to invest in the consumer health biz it inherits in the merger. As the Wall Street Journal Health Blog reports, Clark's big question about growing that business is, "Do we do it alone or do we do it with a partner?" Too soon to say, he said.

Another decision Merck is taking now: Whether to make a bid to sell Singulair over the counter. One Merck exec said the company is looking at that option very carefully, the Health Blog notes.

- read the Bloomberg piece
- check out the post at the Health Blog
- see the story from the New York Times
- get more from the WSJ

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