Tags: merck | profit | buyback | earnings

Merck Cuts Profit Forecast While Boosting Buyback by $15 Billion

Wednesday, 01 May 2013 07:41 AM

Merck & Co., facing generic competition to what was once its best-selling drug, cut its full-year guidance in anticipation of lower sales. The company plans to buy back $15 billion shares.

First quarter earnings, excluding one-time items, were 85 cents a share, beating by 6 cents the average of 17 analysts’ estimates compiled by Bloomberg. Merck cut its full year adjusted earnings projection to $3.45 to $3.55 per share, 15 cents lower than the guidance it gave in February.

“Our first quarter performance reflects the challenges of major patent expiries coupled with the impact of currency and other headwinds,” Chief Executive Officer Ken Frazier said in a statement.

Merck has been eliminating thousands of jobs and trying to boost demand of existing products to overcome the revenue drop from its once-leading drug Singulair, an asthma medication that began facing competition from cheaper copies in August.

Net income fell to $1.59 billion, or 52 cents a share, from $1.74 billion, or 56 cents, a year earlier, the Whitehouse Station, New Jersey-based company said in a statement.

Last month, the company’s head of research and development Peter Kim was replaced by Roger Perlmutter, formerly at Amgen Inc. Kim was replaced after setbacks including the company’s decision in December to end development of a cholesterol drug and its failure to win approval of a drug to slow the growth of sarcoma.

R&D Chief

“The news that head of R&D Peter Kim is leaving the company supports the idea that Merck has lost its way to some degree in terms of R&D,” Timothy Anderson, an analyst with Sanford C. Bernstein & Co. who has an outperform rating on the stock, said in a note to clients before the earnings announcement. “This is problematic for the stock because investors expect Merck to be a best-in-class R&D organization.”

Merck plans to buy back $7.5 billion of its own shares in the next 12 months, with another $7.5 billion available.

“This share repurchase program, combined with our strong dividend, reinforces our continued commitment to delivering increased value to shareholders,” Frazier said in a statement.

Merck has downplayed results for the first quarter, saying in February that 2013 profit would fall as Singulair faced generic competitors. It also announced that first-quarter earnings excluding certain items would be 76 cents to 78 cents, 5 cents lower than originally projected, because of the devaluation of the Venezuelan currency.

Sales fell short of analyst estimates. The company’s revenue fell 9 percent to $10.67 billion, less than the $11.11 billion estimate of analysts.

Januvia, a diabetes treatment that is now Merck’s top product, saw sales fall 4 percent to $884 million. Sales of Singulair fell 75 percent to $337 million.

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Merck & Co., facing generic competition to what was once its best-selling drug, cut its full-year guidance in anticipation of lower sales. The company plans to buy back $15 billion shares.
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Wednesday, 01 May 2013 07:41 AM
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