) to market perform from strong buy.
Analyst Michael Krensavage says he downgraded because he believes Merck will issue an earnings per share warning by early December. He says he thinks Merck's earnings could fall short of expectations on declining sales of Vioxx for pain, as well as increased competition for Zocor for high cholesterol and Fosamax for osteoporosis. Krensavage says lower-than-expected sales of such drugs would depress gross margin. He also says earnings will be lower if generic competition arrives before the end of 2003 for Merck's heartburn drug, Prilosec.
Krensavage cut the $3.04 2002 earnings per share estimate to $2.98, and cut the $3.35 2003 estimate to $3.05.