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EARNINGS ROUNDUP

Schering, Merck Aided by 63% Jump in Joint Sales

October 21, 2006|From the Associated Press

Drug makers Schering-Plough Corp. and Merck & Co., partners on their crucial cholesterol drugs, saw their shares climb Friday after posting third-quarter earnings. But they pleased Wall Street for different reasons.

Schering-Plough reported double-digit sales growth and a nearly sevenfold leap in profit, compared with a quarter depressed by a hefty charge.

Chief Executive Fred Hassan told analysts that the Kenilworth, N.J.-based company, squeezed by slumping sales and government probes a couple of years ago, had finished its turnaround and was entering a "build the base" phase in which it would reach new patients and markets.

Merck, hurt by new generic competition for its top-selling drug and widespread litigation over withdrawn painkiller Vioxx, raised its profit forecast after one-time charges sent its latest earnings lower.

Merck, based in Whitehouse Station, N.J., also said it could now reasonably estimate its Vioxx costs through 2008 and reserved an additional $598 million for future defense costs, on top of the $970 million previously set aside.

The number of Vioxx lawsuits has now topped 24,000, and an additional 15,000 potential plaintiffs have entered agreements temporarily suspending the time to sue.

One thing that helped both companies was a 63% jump in sales of the cholesterol drugs they jointly sell. Vytorin and Zetia had combined revenues edging over $1 billion for the first time.

The companies split the profit, but Merck especially needs it to make up for the June patent expiration of cholesterol fighter Zocor, which once had $5 billion in annual sales.

New generic competition cut U.S. sales of Zocor by 80% in the quarter and total sales to just $371 million, but Merck's overall revenue held steady.

Schering-Plough shares rose 35 cents to $22.68. Shares of Merck climbed $1.15 to $45.64, a new high for the year.

Schering-Plough's net income grew to $287 million, or 19 cents a share, from $43 million, or 3 cents, a year earlier, when results were depressed by a charge of $124 million for items including a research and development payment. Total revenue rose 13% to $2.57 billion.

Analysts surveyed by Thomson Financial expected earnings per share of 15 cents on revenue of $2.44 billion.

Merck reported net income of $941 million, or 43 cents a share, down from $1.42 billion, or 65 cents, a year earlier.

Excluding a charge of $249.2 million, or 8 cents a share, for cutting an additional 500 jobs and other restructuring costs, net income would have equaled 51 cents a share. Revenue was flat at $5.41 billion.

The company beat by a penny the forecast by analysts, who expected earnings per share of 50 cents, excluding one-time items, and revenue of $4.97 billion.

Merck raised its full-year profit forecast to $2.48 to $2.52, excluding 30 cents' worth of restructuring charges, up from its July forecast of $2.40 to $2.48. Analysts are expecting $2.48.

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