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Merck profits rise on Gardasil and Januvia

Merck & Co posts a 63 per cent rise in Q3 FY07 earnings and raised its annual profit forecast on increased sales of cervical cancer vaccine Gardasil and diabetes drug Januvia

US pharmaceutical company Merck & Co has posted a 63 per cent rise in Q3 FY07 earnings and raised its annual profit forecast on increased sales of cervical cancer vaccine Gardasil and diabetes drug Januvia (sitagliptin).

Merck raised its FY07 earnings forecast to USD 2.87 to USD 2.93 a share from USD 2.80 to USD 2.95 three months ago. Excluding certain one-time costs, Merck said it will earn USD 3.08 to USD 3.14 a share, up USD 3.00 to USD 3.10. Net income was USD 2.03 a share in FY06.

The results exceeded analysts' estimates and matched forecasts from the US-based company that FY07 earnings would augment. Generic competition and the 2004 withdrawal of the pain pill Vioxx (rofecoxib) have depressed Merck's net income by 39 per cent since 2001. Q3 FY07 revenue rose 12 percent to reach USD 6.1bn.

Net income increased to reach USD 1.5bn, or an EPS of USD 0.70, compared with USD 941m, or an EPS of USD 0.43 in Q3 FY06. Excluding acquisition and restructuring costs, Merck earned USD 0.75 a share, exceeding the average estimate of USD 0.70 in a Bloomberg survey of 15 analysts.

Vaccines and cancer portfolio success
Sales of Merck's vaccines have more than doubled to reach USD 1.2bn in Q3 FY07, compared with USD 555m in Q3 FY06.

Cervical cancer vaccine Gardasil, which reached the US market in 2006, racked up sales of USD 418m in the quarter. The vaccine is now approved for funding through the US Vaccines for Children programme in all 50 states. About 40 per cent of US children get their vaccines through the programme, according to the Centers for Disease Control and Prevention.

Merck's diabetes treatment, Januvia, the first in a new class of diabetes drugs which enhance the body's mechanisms for regulating blood sugar, posted sales of USD 185m. Januvia beat rivals to market by winning FDA approval in 2006 and has been gaining prescriptions at the expense of GlaxoSmithKline's (GSK) Avandia (rosiglitazone), which has been linked to increased heart attacks, and a delay in US approval for Novartis' diabetes drug, Galvus (vildagliptin).

Statins sales up 26 per cent
Revenue from statins Vytorin and Zetia, which Merck markets along with Schering-Plough (S-P), rose an impressive 26 per cent to reach USD 1.3bn. Merck's share of the sales was USD 481m.

Zetia has a different mode of action from other cholesterol drugs, blocking absorption of cholesterol from food in the digestive tract. Vytorin is a combination of Zetia and Zocor, which attacks cholesterol produced in the liver.

Sales of the asthma medication Singulair, Merck's leading product since the loss of patent protection for Zocor, increased 17 per cent to USD 1bn.

Cost-cutting CEO adds to the profits glow
Merck's CEO Dick Clark has been closing plants to cut costs at the company. The move has seen the company shave marketing and administrative expenses by 12 per cent over the quarter.

ìThere is no question he has transformed this organisation from one where there were questions about its future to one where people want to work,' said Lehman Brothers analysts.

30th September 2008

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