Merck surprises with Q2 FY07 profits increase

Merck & Co have surprised investors with strong earnings growth and an improved full year earnings forecast after posting a 12 per cent increase in Q2 FY07 profits.

Merck now expects at least 20 per cent earnings growth in FY07, excluding one-time items, of USD3-USD3.10 per share, up from USD2.75-2.85, which was its previously revised estimate. This is the third time in six months that Merck have revised their final year profit estimates.

There had been concerns that Merck's products would not be able to help them combat the patent expiry of its blockbuster statin Zocor. However, the success of Merck's cervical cancer vaccine Gardasil, and its diabetes drug Januvia (sitagliptin) have helped boost profits. Gardasil achieved profits of USD358m sales in Q2, and with more countries worldwide adopting human papilloma virus (HPV) vaccination programmes this looks set to rise.  The vaccine has been approved in 80 countries and is currently under review in 40 other countries,

Januvia has only been on the market for two quarters but is already achieving sales of USD144m in Q2.

Vioxx litigation continues to cost Merck; the company reserved USD210m in Q2 for future Vioxx legal defense costs to cover the 27,000 lawsuits it is facing. The drug was withdrawn in 2004 following research that linked it with an increased risk of heart attacks and strokes. 

Other major earners for Merck include Singulair (montelukast), its once-a-day oral medicine for asthma and allergic rhinitis, sales of which reached USD1.1bn for Q2, a growth of 15 percent over the same period in 2006.  Zetia (ezetimibe) and Vytorin (ezetimibe plus simvastatin), cholesterol drugs, co-marketed with Schering-Plough, were also big earners. Global sales of Zetia reached USD578m, an increase of 21 per cent compared with Q2 FY06, and global sales of Vytorin reached USD686m, an increase of 38 per cent compared with Q2 FY06. Both drugs have achieved all-time highs in both new and total prescription share in Q2.

Q2 sales rose by 6 per cent compared with the same period last year, to USD6.1bn.