Merck & Co.
) reported fourth quarter 2012 earnings per share (excluding
special items) of 83 cents, a couple of cents above the Zacks
Consensus Estimate. Earnings, however, declined 14.4% from the
Revenues for the quarter fell 4.5% to $11,738 million.
However, revenues exceeded the Zacks Consensus Estimate of
$11,515 million. Revenues were hit by the patent expiry of
Singulair (indicated for the chronic treatment of asthma and
relief of symptoms of allergic rhinitis) and negative currency
Including one-time items, fourth quarter 2012 earnings
declined 6.1% to 46 cents per share.
Full year earnings increased 1.3% to $3.82 per share, a penny
above the Zacks Consensus Estimate. Revenues, which declined 1.6%
to $47.3 billion, were above the Zacks Consensus Estimate of
The Quarter in Details
Merck's Pharmaceutical segment posted sales of $10.1 billion,
down 6%. Negative currency movement impacted Pharmaceutical
segment sales by 1%. Products like Januvia, Janumet, Zostavax and
Gardasil contributed to sales.
However, the strong performance of these products was offset
by lower sales of Singulair, Vytorin and Cozaar/Hyzaar.
Singulair sales experienced a severe decline following its US
patent expiry in Aug 2012. Sales fell 67% from the year-ago
period to $480 million. US sales were down 97%. We note that
Singulair will lose exclusivity in the EU later this month. The
drug retains exclusivity in Japan until 2016.
Meanwhile, Remicade and Simponi combined sales increased 13%
to $645 million. We expect Merck to focus on improving
penetration rates and drive growth in Europe, Russia and
Isentress, the company's product for HIV infection, recorded a
2% decline in sales which came in at $381 million in the reported
The diabetes franchise, consisting of Januvia and Janumet,
continued to perform well, and witnessed growth in the US and
Japan. Combined sales increased 18% to $1.6 billion. While
Januvia sales increased 18% to $1.1 billion, Janumet sales
increased 17% to $452 million. Merck is working on increasing
sales of its diabetes franchise by gaining approval for
Gardasil, Merck's cervical cancer vaccine, recorded sales of
$442 million, up 61% year over year. Sales were driven by
increased vaccination of males in the US, higher public sector
purchases and strong performance in Japan and emerging
Zostavax sales came in at $225 million, up 188.5%, in response
to the company's promotional efforts and the availability of
supply. Merck had initiated a TV advertising campaign in Apr 2012
to increase awareness about the risk of shingles. The company
also launched a new branded print and online campaign.
Meanwhile, Merck's ProQuad, MMR II and Varivax vaccines
recorded combined sales of $306 million, up 11%. Vytorin sales
declined 8% to $435 million during the quarter.
Merck's hepatitis C treatment, Victrelis (boceprevir) posted
sales of $115 million, down 22.8% sequentially. Merck has an
) for the global marketing of Victrelis as part of a triple
Emerging markets accounted for 20% of pharmaceutical sales in
the fourth quarter of 2012 with China continuing to put in a
Merck's animal health segment posted sales of $898 million, up
3%. Results were driven by growth in cattle and poultry.
Consumer Care sales increased 9% to $395 million in the fourth
quarter of 2012, mainly due to Dr. Scholl's, Claritin and
Marketing and administrative expenses declined 8.3% to $3.3
billion in the fourth quarter of 2012 due to productivity
measures undertaken by the company and currency impact. R&D
spend increased 4.8% to $2.2 billion in the fourth quarter of
Merck expects adjusted earnings in the range of $3.60 - $3.70
per share. Revenues are expected to remain close to 2012 levels.
The company expects full year revenues to be negatively impacted
by 1% - 2% at current exchange rates. The Zacks Consensus
Estimate of $3.70 per share is already at the higher end of the
company's guidance range.
Merck expects R&D spend to remain similar to 2011 levels.
The company spent $7.9 billion on R&D in 2012. The company's
late-stage pipeline is advancing with five regulatory filings
slated for 2013.
Merck's fourth quarter results were impacted by the
genericization of Singulair. With Singulair set to lose
exclusivity in the EU later this month, we expect the top- and
bottom-line to remain under pressure. Meanwhile, the company's
guidance seems to be a bit on the cautious side with the current
Zacks Consensus Estimate of $3.70 per share already being at the
higher end of the company's guidance range.
Merck currently carries a Zacks Rank #3 (Hold). While
headwinds remain in the form of the Singulair genericization, EU
pricing pressure, unfavorable currency movement, US health care
reform and pipeline setbacks, some of the company's recent
launches should start contributing significantly to the top line
in the forthcoming quarters.
Currently, large-cap pharma stocks that look more attractive
include companies like
). Both stocks carry a Zacks Rank #2 (Buy).
MERCK & CO INC (MRK): Free Stock Analysis
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