Merck & Co. (MRK:US) forecast profit to decline this year as generic competition to its top-selling drug Singulair cuts into results and research setbacks keep the company from getting new medicines to market.
Merck, the second-largest U.S. drugmaker, also said today it will delay seeking U.S. approval for experimental osteoporosis medicine odanacatib until 2014, a year later than planned. The Whitehouse Station, New Jersey-based company is waiting for results of a second large study before presenting the medicine to regulators.
The postponement added to investor concerns about the drugmaker’s inability to bring new products to market and sent shares down the most since August 2011. Merck said in December it wouldn’t seek U.S. approval for a cholesterol medicine and it failed in June to win clearance for a therapy aimed at slowing the growth of sarcoma. The lack of new drugs contributed to a 2 percent revenue drop last year after Merck’s asthma treatment Singulair began facing competition from cheaper copies.
“I think the few players that are involved in these stocks are getting impatient, they have been tested for years,” Bill Smead, chief executive officer of Seattle-based Smead Capital Management, said in a telephone interview. “They want something that is going to gratify them in six months, but this is a great three- to five-year play.”
Investors also are looking for Merck to restructure and possibly sell off non-pharmaceutical units, as other drugmakers have, said Mark Schoenebaum, an analyst with ISI Group. Merck Chief Executive Officer Ken Frazier said he has no plans to break off Merck’s animal health unit into a separate business the way Pfizer Inc. did. Zoetis, the Pfizer-owned animal health company, began trading today.
“We are committed to the business,” Frazier said in a telephone interview today. “We think it is a good business, it dovetails nicely with our human health business.”
Merck fell 3.3 percent to $41.83 at the close in New York. The shares have gained (MRK:US) 8.3 percent in the past 12 months.
Earnings, excluding one-time items, will be $3.60 to $3.70 a share this year, compared with the $3.69 average of 20 analysts’ estimates (MRK:US) compiled by Bloomberg. Adjusted earnings in 2012 were $3.82 a share, the company said.
Fourth-quarter net income declined 7.3 percent to $1.4 billion, or 46 cents a share. Excluding one-time items, earnings were 83 cents a share, beating by 2 cents the average of 17 analyst estimates compiled by Bloomberg. Revenue fell 4.5 percent to $11.7 billion, hurt by a 67 percent drop of Singulair sales to $480 million. Full-year revenue in 2012 was $47.3 billion.
Merck in December said it wouldn’t seek U.S. approval for good cholesterol drug Tredaptive after a study showed it ineffective and potentially harmful, and later said it would stop selling the drug in the 70 countries where it is approved. In June, Merck and partner Ariad Pharmaceuticals Inc. (ARIA:US) failed to win clearance for the sarcoma therapy, with U.S. regulators saying the medicine needed more study.
Merck today said it wanted the results of a second study on the osteoporosis drug before proceeding because in the first study some potential safety issues occurred. The company didn’t elaborate on what those concerns were.
The delay “will disappoint many investors and we expect will pressure the shares today,” Jeffrey Holford, an analyst with Jefferies & Co. said in a note to clients. “This points to a more chronic and serious set of potential adverse events for odanacatib than we had anticipated.”
Merck said today it still plans to seek approval for five products in 2013.
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