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Merck feeling good in 2Q
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July 24, 2000: 1:29 p.m. ET
Drug company tops estimate by 4 cents a share; arthritis treatment boosts sales
By Staff Writer Martha Slud
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NEW YORK (CNNfn) - Merck & Co., the second-biggest U.S. drug maker, reported a 16 percent jump in second-quarter profitability Monday, beating Wall Street forecasts, and said a strong first half should also push full-year results above expectations.
Shares of Merck (MRK: Research, Estimates), one of the 30 stocks in the Dow Jones industrial average, jumped 6-1/16, or nearly 10 percent, to 69-13/16 Monday afternoon in response to the better-than-expected results.
The Whitehouse Station, N.J.-based company earned $1.72 billion, or 73 cents per diluted share, for the three-month period, up from $1.48 billion, or 61 cents per share, in the year-ago quarter.
Wall Street had expected a profit of 69 cents per share for the latest quarter, according to the consensus forecast of analysts polled by earnings tracker First Call.
Second-quarter sales rose 18 percent to $9.48 billion.
 The company credited the gains in part to arthritis and acute pain drug Vioxx, which racked up sales of $475 million during the quarter. The treatment was introduced last May, several months after a similar drug, Celebrex, was introduced by Pharmacia Corp (PHA: Research, Estimates) and Pfizer Inc.
"The star obviously is Vioxx. Merck has done a spectacular job of making that a success," said Viren Mehta, a pharmaceutical analyst at Mehta Partners.
Sales of Merck's cholesterol-lowering treatment Zocor also gained ground, rising 20 percent to $1.3 billion. Sales of blood pressure treatments Cozaar and Hyzaar rose 24 percent to $415 million.
The company also cited growth in its Merck-Medco prescription drug benefits management business.
For the first six months of the year, Merck's net income rose 16 percent to $3.2 billion, while earnings per share increased to $1.37 from $1.15 a year earlier. Sales for the first half grew 18 percent to $18.3 billion.
The company said the first-half results should push full-year earnings above the First Call consensus forecast of $2.79 per share. Earnings growth for the first two quarters is expected to be stronger than the remaining two.
During the quarter, Merck was knocked from its perch as the biggest U.S. pharmaceutical company by the new Pfizer Inc. (PFE: Research, Estimates), which acquired smaller rival Warner-Lambert Co.
In May, Merck and drug maker Schering-Plough Corp. (SGP: Research, Estimates) struck two partnerships in which they will develop and market new treatments for cholesterol and asthma.
The companies will jointly develop a once-a-day combination of Zocor with Ezetimibe, a Schering-Plough cholesterol absorption inhibitor. They also will collaborate on a new respiratory treatment that combines Merck's asthma therapy with Schering's blockbuster allergy drug Claritin.
Generic competition looms
Industry analysts say that Merck's strong first-half results will help quell doubts about the company's future.
Several of the company's products, including hypertension drug Vasotech and ulcer drug Prilosec - which it co-markets with British-based AstraZeneca (AZN: Research, Estimates) -- face patent expiration in the next few years, meaning competition from cheaper generic rivals could sharply reduce any profit.
But the successful introduction of Vioxx and other new products is helping Merck shore up its sales amid the prospect of increased generic competition, said Barbara Ryan, a pharmaceuticals analyst at Deutsche Banc Alex. Brown
"We think Merck can manage through that period, and still report double-digit earnings growth (that is) slower than what they're doing now, but still OK," she said. 
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Merck
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