Merck cut its sales forecast and posted a 50% drop in quarterly earnings as it continues to absorb major hits to its once-blockbuster Singulair. And though newer products did deliver some growth, lagging increases in Januvia sales aren't doing enough to take up the slack. The fact that profits beat analyst expectations says as much about those expectations as it does about Merck's ($MRK) performance for the quarter.
The allergy drug's sales plummeted by 80% year over year, and other recently off-patent drugs continued to slide, losing $76 million here (Clarinex) and $83 million there (Cozaar/Hyzaar). And Vytorin, the combo cholesterol pill, dwindled a bit more to $417 million, a loss of 6% compared with last year. Meanwhile, low-single-digit growth for its leading diabetes franchise, Januvia/Janumet, took up only a portion of the slack.
So, the company downgraded top-line expectations again. Rather than expecting sales to be mostly flat this year, as the company predicted in February, or even the decline of 3% to 4% expected in May, Merck is looking for a 5% to 6% hit. It still expects to meet May's earnings targets--$3.45 to $3.55 per share--in part because of lower-than-expected R&D expenses. But it's worth noting that those EPS estimates were lower than the $3.60-to-$3.70 range set out in February.
All of this puts even more pressure on Merck's pipeline, which has been sputtering of late. FDA stiff-armed its sleep drug, suvorexant, asking for a lower dose considered less effective, if safer. Its sugammadex anesthesia drug met with another delay, as the agency canceled an advisory panel meeting, saying it needed more time to review the data.
To be fair, Merck did announce some progress earlier this week on a clot-fighting drug, vorapaxar; the FDA accepted its approval application for standard review. And its new R&D chief, Roger Perlmutter, took a scalpel to his operations last month, with a management shake-up designed to help simplify things.
In an investor note, Leerink Swann's Seamus Fernandez called updates on Merck's immuno-oncology pipeline "critical." So would be "any future thoughts on [Merck]'s current business structure," he wrote. With Pfizer's ($PFE) latest restructuring--which will segregate internal operations into three distinct units--and speculation about its being a prelude to a potential break-up, any Big Pharma company is likely to get similar hints.
- see the Merck release
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