U.S. drugmakers Pfizer Inc and Merck & Co posted better-than-expected first-quarter profit and revenue on Tuesday, but Merck gave a 2010 earnings forecast that could fall short of Wall Street's target.
Pfizer shares rose 1.7 percent in premarket trading, while Merck shares were up 1.8 percent.
Pfizer and Merck -- the world's top two drugmakers by 2009 sales, according to IMS Health -- stood by their long-term profit forecasts that depend on huge cost savings from their respective recent acquisitions of U.S. rivals Wyeth and Schering-Plough.
It looks like both companies are already getting leverage from merger-related cost savings, and it's going right to the bottom line, said Morningstar analyst Damien Conover. This is a trend that we'll see continue going forward.
Merck earned $299 million, or 9 cents per share, in the quarter with results hurt by a number of special charges and a tax expense related to the recently enacted U.S. healthcare reform law. That compared with $1.43 billion, or 67 cents per share in the year-earlier period.
Excluding special items, Merck earned 83 cents per share. Analysts on average expected 75 cents per share, according to Thomson Reuters I/B/E/S.
The results for Merck and Pfizer also complete that theme we've seen for other drugmakers this quarter, that largely good results are offsetting the costs of healthcare reform, Conover said.
Merck's revenue more than doubled to $11.42 billion on the strength of the Schering deal. Analysts looked for $11.18 billion.
Sales of the Januvia diabetes franchise jumped 32 percent to $712 million, including explosive growth outside the United States, compared to the consensus estimate of $622.2 million of six analysts, according to Thomson Reuters I/B/E/S.
Sales of the Singulair asthma pill rose 10 percent to $1.2 billion compared to the consensus estimate of $1.13 billion of eight analysts.
The company expects 2010 earnings of $3.27 to $3.41 per share, excluding special items. Analysts were expecting $3.41 per share.
Merck continues to target high single-digit compound annual earnings growth for the newly combined company, excluding special items, from 2009 to 2013, when compared with Merck's 2009 earnings.
The company, based in Whitehouse Station, New Jersey, said it remains on track to achieve annual cost savings of $3.5 billion from the merger in 2012.
Pfizer earned $2.03 billion, or 25 cents per share in the quarter. That compared with $2.73 billion, or 40 cents per share, in the year-earlier period.
Excluding special items, Pfizer earned 60 cents per share. Analysts on average expected 53 cents per share.
Pfizer posted revenue of about $16.75 billion. Analysts looked for $16.58 billion.
Sales of its Lipitor cholesterol fighter inched up 1 percent to $2.76 billion, compared to the consensus estimate of $2.64 billion of eight analysts.
Sales of Lyrica, for neuropathic pain, rose 6 percent to $723 million, just below the consensus estimate of $724.3 million of eight analysts.
Pfizer backed its 2010 profit forecast of $2.10 to $2.20 per share, excluding items, despite a revenue hit from the new U.S. health reform law.
The New York-based drugmaker backed its 2012 profit forecast of $2.25 to $2.35 per share, excluding items. That forecast tracks Wall Street's expectations for 2011, possible proof that the Wyeth merger will prevent Pfizer earnings from plunging once Lipitor goes generic as early as late 2011.
Pfizer said it remains on track to achieve cost reductions of about $4 billion to $5 billion by the end of 2012, compared with 2008 combined costs of Pfizer and Wyeth.
(Reporting by Ransdell Pierson and Lewis Krauskopf, editing by Dave Zimmerman)