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Merck to Cut 4,400 Jobs After Profit Falls

October 23, 2003|From Bloomberg News

Merck & Co., stung by profit woes, dispensed a triple dose of grim news Wednesday -- reporting weak results in the third quarter, warning that it would fall short of 2003 earnings targets and saying it would cut 4,400 jobs because sales of Zocor, its top-selling cholesterol medicine, fell.

Shares of the nation's second-biggest drug maker declined 6.5% on the news, their biggest drop in more than a year.

Merck said third-quarter net income slipped to $1.86 billion, or 82 cents a share, from $1.88 billion, or 83 cents, a year earlier. Merck, based in Whitehouse Station, N.J., marked its fourth profit decline in the last seven quarters. Zocor sales fell 2% to $1.4 billion after it lost patent protection in some countries.

Chief Executive Raymond Gilmartin is cutting costs, reducing Merck's workforce by 7%, to overcome falling orders for Zocor and painkiller Vioxx, Merck's two bestselling drugs.

"We're not having any fun today," said Lynn Yturri, who manages the $480-million One Group Equity Income Fund at Banc One Investment Advisors and owns 160,000 Merck shares. "Merck is the kind of company where investors expect better."

Earnings in the last three months of 2003 will be lowered by as much as 21 cents a share as Merck works down inventory and changes the way drugs are distributed to wholesalers.

Shares of Merck, which trails Pfizer Inc. for drug sales among U.S. companies, fell $3.19 to $45.72 on the New York Stock Exchange.

In July, Merck said Zocor sales this year would be lower than the company had estimated after the drug lost patent protection in several countries. Zocor, which had revenue of $5.6 billion last year, also is competing with Pfizer's Lipitor and Crestor from AstraZeneca.

Including costs for job reductions and changes in distribution, Merck's earnings for the year will be $2.90 to $2.95 a share. In July, the company said 2003 earnings would be $3.40 to $3.47 a share.

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