Merck & Co
Shares of the No. 2 U.S. drugmaker fell nearly 3 percent after it yanked its profit view for 2009 through 2013 and forecast 2011 results that fell short of Wall Street estimates.
Investors had considered Merck, buoyed by its 2009 purchase of Schering-Plough for $41 billion, as better positioned than many of its peers to weather an influx of generic versions of their biggest brands,
But that changed last month when Merck's most promising drug from that acquisition, the blood clot preventer vorapaxar, was deemed unsuitable for stroke patients, shrinking sales prospects that had been forecast at more than $3 billion.
Rivals in the industry have eliminated jobs and taken other steps to shore up their profits. Earlier this week, Pfizer Inc's
Merck's new CEO Kenneth Frazier said he refused to resort indiscriminate cost cutting and would rather ditch the forecast of high-single-digit annual profit growth through 2013 than the research.
It isn't we couldn't cut costs enough to make long-term guidance. We couldn't do that fast enough without sacrificing opportunities to invest in drug research, Frazier told investors in a conference call on Thursday.
Analysts said that removing the long-term assurance on performance will hurt Merck's shares short-term.
We support investment in R&D and thinking long-term, but it seems like they are asking shareholders to absorb all extra expenses rather than finding internal sources to share resource needs, Credit Suisse analyst Catherine Arnold said in a research note.
We believe this move makes longer-term sense relative to Merck's current research and development ... acknowledging that it could put some near-term pressure on the shares of Merck, JP Morgan analyst Chris Schott said in a research note.
Merck was among the last of the big drugmakers to report quarterly results on Thursday. By contrast, British-based rival GlaxoSmithKline Plc
JANUVIA, SINGULAIR SALES HELP QUARTER
Merck reported better-than-expected fourth-quarter sales and earnings, helped by diabetes treatment Januvia, Singulair for asthma and rheumatoid arthritis treatment Remicade.
It posted a fourth-quarter loss of $500 million, or 17 cents per share, including a charge of $1.7 billion related to the major setback in clinical trials for vorapaxar.
That compared with a profit of $6.5 billion, or $2.35 per share, in the year-earlier period, when it recorded a big gain related to its purchase of Schering-Plough.
Excluding one-time items, Merck earned 88 cents per share in the quarter. That topped the average forecast of 83 cents among analysts polled by Thomson Reuters I/B/E/S.
Merck said it expects full-year 2011 earnings of $3.64 to $3.76 per share. Wall Street had been expecting $3.82 per share. The company said it expects revenue to grow in the low- to mid-single digit percentage range.
The drugmaker said it was yanking its 2009 to 2013 forecast due to the vorapaxar setback, European austerity measures that will limit government spending on healthcare, and the growing costs tied to a new U.S. healthcare law.
Many rival U.S. and European drugmakers have also issued cautious 2011 forecasts in recent weeks, citing pressures in Europe to curb prices and higher rebates and fees mandated this year under U.S. healthcare reforms.
Merck said it now expects to close a planned animal-health joint venture with Sanofi-Aventis
Merck shares slipped 2.7 percent to $32.92.
(Additional reporting by Lewis Krauskopf; Editing by Derek Caney, John Wallace, Dave Zimmerman)