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Merck returns to profit in Q4

Gains in diabetes division, but generics pose threat for 2012

Merck & Co posted a modest increase in fourth-quarter 2011 revenues thanks to gains in its diabetes franchise, but like many other pharma companies is facing a difficult 2012 on upcoming generic competition to some big-selling brands.

Revenues rose 1.6 per cent to $12.29bn, slightly short of analyst expectations, but Merck posted a net income of $1.5bn in the quarter. This compared to a loss of more than $530m year ago.

Sales increases played their part in that profit recovery, although most of the effect came from non-recurring charges in 2010 related to Merck's discontinuation of experimental anticoagulant vorapaxar.

Leading the charge among Merck's key brands was type 2 diabetes treatment Januvia (sitagliptin), which grew 42 per cent to $960m in the quarter and added a little under $2.4bn to Merck's reserves over the full year.

Line extension Janumet (sitagliptin plus metformin) also put in a good showing, up 34 per cent to $386m in the quarter.  An extended-release formulation of that product has just been approved by the US FDA and should lend additional momentum to the franchise.

Merck's top-selling product was once again asthma and allergy drug Singulair (montelukast), with sales up 8 per cent at $1.46bn, but the loss of US patent protection on this drug due in August is expected to prompt dramatic sales erosion in 2012 as a whole.

Also performing well was human papillomavirus (HPV) vaccine Gardasil, rising 24 per cent to $274m on increased vaccination rates in males, and HIV drug Isentress (raltegravir) which advanced 24 per cent to $387m.

On the downside, Merck's sales of arthritis treatment Remicade (infliximab) fell by 28 per cent to $511m after it returned some marketing rights to the drug to Johnson & Johnson in July 2011.

Cholesterol treatment Vytorin (ezetimibe/simvastatin) fell 16 per cent to $475m thanks to decreased demand in the US.

"We closed out 2011 with a high-quality fourth quarter by growing the top and bottom lines," commented CEO Kenneth Frazier.

"As we begin 2012 and look ahead, we are optimistic about our underlying business, our current momentum and the early success of our strategy."

3rd February 2012

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