DRugwatch BlogRSS 2.0

DRugwatch Blog > November 2011 > Stronger Third Quarter Earnings for Merck -on Vaccine Recovery and Cost Cuts

Stronger Third Quarter Earnings for Merck -on Vaccine Recovery and Cost Cuts

Mike LatwisContributor: Mike Latwis

Merck reported improved year-over-year (YoY) sales growth at an 8% pace in the third quarter, with a significant top-line contribution from currency (5 percentage points). The double-digit growth of the key Singulair, Januvia, JanuMet, Gardasil and Isentress products were able to offset the impact of ongoing generic erosion and the loss of certain overseas rights for Remicade and Simponi in the quarter. As a result of its arbitration settlement with J&J, Merck lost several emerging market territories for Remicade and Simponi, which resulted in a $100m (-15%) decline in Remicade sales on a YoY basis. On the positive side, the company's vaccine franchise showed a further recovery in the third quarter with Gardasil, RotaTeq and Pneumovax recording exceptional YoY gains. Gardasil trends were supported by its expanded indication for males, as well as its launch in Japan, which contributed to 41% growth and $445m in quarterly sales. Zostavax vaccine sales also jumped YoY, but management cautioned that back orders still need to be worked through to ensure adequate supply for the brand going forward. Surprisingly, sales of the company's new Victrelis product, contributed only $31m in third quarter sales, which was up from $21m in the second quarter, but well below the $420m in quarterly sales reported by its main competitor, Vertex' Incivek. Merck expects Victrelis trends to continue to improve, due to a longer therapeutic cycle than Incivek, and ongoing launches throughout Europe.

Merck's quarterly earnings were also supported by good cost control, particularly on the R&D line, due to efficiency gains and site closures in 2010. This was enough to offset a modest uptick in the SG&A-to-sales ratio, with spending behind new product launches and investments in emerging markets, to show a 220 basis point (bp) operating margin improvement. Below the operating line, Merck experienced a 150 bp increase in its effective tax rate, which was due to changes in the company's geographic and product mix, as well as a favorable tax settlement recorded in the year ago period.

Overall, Merck delivered double-digit earnings growth on an adjusted (non-GAAP) basis in the third quarter at 94-cents a share, which were 3-cents above consensus forecasts. This EPS figure excludes $1.2b in special acquisition-related, purchase accounting and restructuring charges, as well as a divestment gain (consumer health joint venture) in the quarter. Following these results Merck raised the low-end of its prior earnings guidance range to $3.72 to $3.76 per share for the full-year 2011. Management confirmed its latest cost reduction goal of $1.3b to $1.5b a year by the end of 2015, which involves a 12% to 13% reduction in its workforce. The company also highlighted its commitment to returning cash to shareholders with a $1.2b dividend payout and $1.0b in share buybacks during the third quarter, while moving its intended R&D spending to a slightly lower $7.8b to $8.1b range for the full-year.

Despite recent pipeline setbacks and lower R&D spending this quarter, Merck continues to rely on its innovative-driven R&D model to provide the new products to support the growth of its pharma business. During the third quarter, the company showed progress with the FDA approval of its Juvisync (Januvia and simvastatin) combination diabetes treatment, and European Commission approval of its Zoely (NOMAC-E2) oral contraceptive. In addition, Merck's filing of ridaforolimus for the treatment of bone sarcomas was accepted in both the US and Europe. Merck also responded to prior FDA concerns surrounding its XR formulation of JanuMet in the quarter.

Posted on: 11/1/2011 1:49:12 PM | with 0 comments

Tags: Market Access, Matt Latwis

Trackback URL: http://decisionresources.com/trackback/e265d245-1ca9-4a83-a45a-f92e065440bf/Stronger-Third-Quarter-Earnings-for-Merck--on-Vaccine-Recovery-and-Cost-Cuts.aspx?culture=en-us

Blog post currently doesn't have any comments.
Leave comment Subscribe

What is the abbreviation for Accountable Care Organization?


rss twitter linkedin


DRugwatch Blog

Quick insight on intriguing drug market developments from Decision Resources’ analysts.

Recent posts

Post title:
The Budgetary Impact of Diabetic Comorbidities in Brazil and Mexico - How Little is Being Done to Measure and Control It
Post date:
8/31/2015 10:48:39 AM
Post Summary:
The type 2 diabetes (T2D) therapy market is often tied to a high commercial opportunity. Indeed, when we look at key Latin American markets such as Brazil and Mexico -- each with over 14 million prevalent cases of T2D and growing, and Mexico with one of the highest prevalence rates in the world -- it is unsurprising that Brazil’s and Mexico’s total pharmaceutical market for type 2 diabetes rival the size of some of the more mature markets.

Post title:
2015 ESC Congress in London – Overview of Upcoming Hot Line Sessions
Post date:
7/2/2015 11:57:46 PM
Post Summary:
Conor WalshContributor: Conor Walsh M.Sc., Ph.D.
Topics: Conference Commentary, Cardiovascular

This year’s ESC congress will take place in the Excel Exhibition Centre in London, United Kingdom. The spotlight this year is “environment and the heart,” highlighting the many different kinds of interactions between the environment and cardiovascular diseases.

Post title:
FDA Approval for The Medicines Company’s Intravenous Antiplatelet Kengreal
Post date:
6/23/2015 1:22:54 PM
Post Summary:
Conor WalshContributors: Conor Walsh, M.Sc., Ph.D.
Topics: Cardiovascular

On June 22nd, 2015 the U.S. FDA approved Kengreal (cangrelor), the Medicines Company’s intravenous antiplatelet drug for use “as an adjunct to percutaneous coronary intervention (PCI) for reducing the risk of periprocedural myocardial infarction, repeat coronary revascularization, and stent thrombosis in patients in who have not been treated with a P2Y12 platelet inhibitor and are not being given a glycoprotein IIb/IIIa inhibitor.”

Post title:
Hematological Malignancies: Are Immune Checkpoint Inhibitors Checking-in?
Post date:
6/17/2015 9:32:42 AM
Post Summary:
Contributor: Dana Gheorghe, Ph.D
: Conference Commentary, Oncology

Recent years have seen an added emphasis on the relationship between cancer and the activity of the immune system. Novel agents that aim to harness the immune system have already been approved in the U.S. for solid tumors (Bristol-Myers Squibb/Ono Pharmaceutical’s Opdivo [nivolumab] for NSCLC and malignant melanoma, and Merck & Co.’s Keytruda [pembrolizumab] for malignant melanoma), and are in development for a plethora of other oncology indications. Most of the development has been targeted towards solid tumors, but the potential of immune checkpoint inhibitors in hematological malignancies is becoming increasingly evident.

Post title:
Cardiovascular Outcomes Trials Answer Long-Asked Questions – But New Questions Arise
Post date:
6/12/2015 10:26:05 AM
Post Summary:
Contributor: Eamonn O'Connor, Ph.D.

The recent American Diabetes Association’s 75th Scientific Sessions in Boston saw the release of data from the ELIXA cardiovascular outcomes trial (CVOT) for lixisenatide (Sanofi/Zealand Pharma’s Lyxumia), the first such trial completed for the GLP-1 receptor agonist drug class. However, it was the publication of the data from the CVOT for sitagliptin (Merck’s Januvia/Ono’s Glactiv), known as TECOS1, that was most eagerly anticipated; this is because the previous CVOTs for saxagliptin (AstraZeneca’s Onglyza) and alogliptin (Takeda/Furiex’s Nesina/Vipidia) had raised significant concerns about a potential risk for increased rates of hospitalization due to heart failure. The results from TECOS therefore, were viewed as pivotal as to whether this risk was a feature specific to the DPP-IV inhibitor drug class.

Decision Resources Group brands include: