Merck & Co.’s (MRK) earnings per share (EPS) for the first quarter of 2010 came in at 83 cents (excluding charges totaling $2.3 billion), above the Zacks Consensus Estimate of 75 cents and the year-ago results of 74 cents. However, including the adjustments, the company reported an EPS of 9 cents.
Merck reported revenues of $11.42 billion compared with $5.4 billion in the first quarter of 2009. However, these are not comparable since the company merged with Schering-Plough on November 3, 2009, boosting results in the current quarter. Revenues in the reported quarter were also favorably impacted by 4% due to foreign exchange movement.
Results by Product
Gardasil, Merck’s cervical cancer vaccine, recorded yet another quarter of lower sales. For the reported quarter, Gardasil’s sales came in at $233 million, down 11% year over year. Sales have struggled recently due to the difficulty in penetrating older patients. However, Merck’s ProQuad, MMR II and Varivax vaccines recorded a 27% growth in combined sales to $319 million.
Singulair, one of Merck’s top selling drugs, continued its growth momentum. The drug, meant to treat asthma and relief symptoms of allergic rhinitis, recorded $1.2 billion in sales, up 10% year over year. Another drug to record strong growth in the category of Bone, Respiratory, Immunology and Dermatology is Remicade, which recorded a 30% growth in revenues to $674 million.
Cardiovascular franchise sales, primarily consisting of Vytorin and Zetia, recorded $1 billion in annual sales, marginally increased from the first quarter of 2009. Isentress, the company’s product for HIV infection, recorded an increase of 57% to $232 million during the reported quarter.
Isentress’ label was expanded in both Europe and the U.S. in 2009 to include its use as a combination therapy for previously untreated patients. As a result, we expect the drug to record increased sales in the forthcoming period.
Merck’s antihypertensive medicines, Cozaar and Hyzaar, recorded a 7% decline in sales to $782 million during the quarter. Sales from these two drugs are expected to decline significantly going forward as these drugs lost market exclusivity in the U.S. in April and in some of the major European markets during the first quarter.
The diabetes franchise, consisting of Januvia and Janumet, had a robust performance during the quarter compared with the year-ago period. While Januvia sales grew 24% to $511 million, Janumet recorded sales of $201 million, an increase of 56%.
On Track Following Merger
Following the completion of its merger with Schering-Plough in November 2009, Merck is confident of achieving its previously announced target of $3.5 billion in annual savings in 2012. The company also provided guidance for 2010.
Merck expects revenues and adjusted EPS in the range of $45.4−$46.4 billion and $3.27−$3.41, respectively. The Zacks Consensus Estimate of $3.41 is already at the higher end of the range.
We also note that Merck is still on target to achieve a high single-digit growth rate in adjusted EPS for the period of 2009−2013. The recently passed healthcare reform is expected to hit Merck’s 2010 revenues by $170 million including the first quarter impact of $33 million. The bill is likely to have an unfavorable impact of $300−$350 million on 2011 sales. We are Neutral on the stock.
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