Merck Revenue and Profit Falls -- Update

By Austen Hufford and Peter Loftus 

Merck & Co. posted declines in sales and profit as the pharmaceutical giant gave revenue projections below analyst forecasts and earnings expectations on the lower end of them.

Merck shares, which have fallen 11% in the last three months, fell 2.9% to $48.95 in midday trading Wednesday.

Merck said it expects 2016 adjusted earnings per share of between $3.60 and $3.75 and revenue between $38.7 billion and $40.2 billion. Analysts polled by Thomson Reuters had expected earnings of $3.72 a share on revenue of $40.25 billion.

One contributor to 2016 sales will be Zepatier, a new treatment for hepatitis C that was approved last week by the U.S. Food and Drug Administration. The market for hepatitis C drugs is now dominated by Gilead Sciences Inc., but Merck hopes to gain ground partly by competing on price.

Merck set a list price for Zepatier of $54,600 a patient for a 12-week treatment, more than 30% below the list prices for competing drugs from Gilead and AbbVie Inc., though in line with net prices for those drugs after discounts, according to Merck.

Merck said it expects the price for Zepatier to maximize its revenue and market share, and to broaden patients' access to hepatitis C treatment. The list price could reduce out-of-pocket expenses for certain patients, such as those covered by the Medicare Part D drug benefit, versus competing drugs, Adam Schechter, Merck's head of human health, said on a conference call.

Mr. Schechter didn't rule out providing discounts on Zepatier, saying Merck planned to "compete in all segments of the market and to have an appropriate discounting strategy that allows us to have access." He didn't specify the magnitude of any discounts. Bernstein analyst Tim Anderson said in a research note Wednesday he believes Merck is offering a 15% discount off the list price to payers.

The quarter's pharmaceutical revenue fell 3.7% to $9.03 billion, including an 8% negative impact from currency fluctuations. Combined sales of Type 2 diabetes treatments Januvia and Janumet declined 12%. Type 2 diabetes treatment Januvia posted a 12% sales decrease. Recently, Januvia has faced an FDA safety alert about risk of joint pain for it and other drugs in its category. Merck said the decrease was expected and driven by the timing of purchases.

HPV vaccine Gardasil sales increased 40% due to an increase in government purchases in the U.S.

Sales of Remicade, a treatment for inflammatory diseases, decreased 29% due to loss of exclusivity and the accelerating impact of competition by biosimilar drugs.

In January, the U.S. Food and Drug Administration approved Merck's new treatment, Zepatier, for hepatitis C, the latest entrant in a booming market for drugs for the viral infection--a market now dominated by Gilead Sciences Inc.

Overall, the company posted a profit of $976 million, or 35 cents a share, down 87% from $7.32 billion, or $2.54 a share, a year prior.

The previous quarter's earnings included proceeds from the sale of Merck's over-the-counter business to Bayer AG for $14.2 billion. Excluding that and other items, earnings were 93 cents, up from 87 cents. Sales slipped 2.5% to $10.22 billion.

Analysts forecast per-share earnings of 91 cents a share on revenue of $10.35 billion.

Write to Austen Hufford at [e-mail] and Peter Loftus at [e-mail]

(END) Dow Jones Newswires

February 03, 2016 12:53 ET (17:53 GMT)

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