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Patent Cliff May Weigh On Merck (MRK) Earnings

 January 30, 2013 10:36 AM

(By Mani) Pharma giant Merck & Co., Inc. is set to report lower profit, when it report its fourth-quarter results on Feb.1 as it faces the industry-wide issue of patent expirations that are hurting sales of key drugs.

Whitehouse Station, N.J.-based Merck is expected to earn 81 cents a share, a 16 percent decline from 97 cents it earned in the same quarter last year.

Merck earnings have managed to beat analysts consensus view in all of the past four quarters. However, the Wall Street's optimism on the earnings potential has slightly diminished in the past 90 days, during which the estimate has come down from 83 cents. During the past 30 days, three analysts have cut their earnings estimate while one analyst has increased it.

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Quarterly revenue is estimated to fall 6.7 percent to $11.47 billion, according to analysts polled by Thomson Reuters. In the fourth quarter of last year, Merck generated revenue of $12.29 billion.

Merck's best-selling drug Singulair, which treats asthma and allergies, lost U.S. patent protection last August. Sales of the branded drug tumbled 55 percent to $602 million for the third quarter. The drug is due to lose patent protection in major European countries next month.

Though Merck has lost some patents, it has also continued to spend on the research and development to find the next blockbuster drug. For the time being, Merck could benefit from the vaccine sales such as Afluria for influenza virus, which is timely now considering the current outbreak of influenza.

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For the third quarter, the world's second-biggest drugmaker reported net income of $1.73 billion or 56 cents a share, higher than $1.69 billion or 55 cents a share in the prior-year quarter. Excluding items, it earned 95 cents a share. Total sales for the quarter decreased 4 percent to $11.49 billion from $12.02 billion in the same quarter last year.

For fiscal 2012, Merck sees earnings of $3.78 to $3.82 per share. Analysts expect earnings of $3.80 a share.

Competition from low-cost generic drugs has hurt sales of other health care giants such as Pfizer Inc. (NYSE:PFE), Eli Lilly & Co. (NYSE:LLY) and Bristol-Myers Squibb Co. (NYSE:BMY).

Revenues of Pfizer, the World's biggest pharma company, declined 7 percent to $15.07 billion due to the loss of exclusivity of cholesterol drug Lipitor in November 2011 and Geodon in March 2012. A $4.83 billion gain from the sale of the nutrition business boosted the company's profit.

Indianapolis, Indiana-based, Eli Lilly reported lower net income of $827.2 million or 74 cents per share compared to $858 million or 77 cents per share in the prior-year quarter. Total revenue for the quarter declined 1 percent to $5.96 billion, hurt by the expiration of Zyprexa patent.

Bristol-Myers Squibb net sales for the quarter declined 23 percent to $4.19 billion following the U.S. patent expiration of hypertension drug Avapro/Avalide in March 2012 and blood thinner Plavix in May 2012. However, a tax benefit and lower costs helped the company post higher earnings.

Out of 21 analysts covering the Merck stock, 13 of them rate it as a "strong buy" or "buy," while 8 analysts recommend a "hold." There were no "sell" rating on the stock.

Merck shares, which currently trades at 12 times its 2013 consensus EPS estimates of $3.68, have increased 10 percent in the last one year and trading between $36.91 and $48.00.



11/27/2013 3:00:49 AM
by Adam Jewl
#MRK missed its earning expectation, as the current revenue for the 3QFY2013 is $11.03bn which is lower than analysts’ estimation of $11.13bn
Rating: (0) (0)
11/27/2013 3:04:19 AM
by Adam Jewl
#MRK missed its earning expectation, as the current revenue for the 3QFY2013 is $11.03bn which is lower than analysts’ estimation of $11.13bn http://goo.gl/p3L441
Rating: (0) (0)
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