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Much ado about Merck?
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April 16, 1998: 11:13 a.m. ET
Pharmaceutical giant falls a penny shy of street in 1Q, but analysts shrug
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NEW YORK (CNNfn) - Merck & Co.'s stock fell nearly 3 percent in morning trading Thursday after the pharmaceutical powerhouse reported first-quarter earnings a penny shy of Wall Street consensus estimates.
Analysts tended to minimize the long-term impact of the shortfall, however. They suggested it had less to do with discernible missteps at Merck - which has proven itself a pacesetter in the development of many cutting-edge health products - than with industry-wide trends.
"Merck has so many irons in the fire, this is more of a group move to some extent," said William Kurtz, and equity analyst with H.G. Wellington. "If drugs are in demand, and they are generally, then they go up and down together as a group."
The New Jersey-based pharmaceutical giant posted net income of $1.16 billion, or 95 cents a diluted share, up 16 percent from $1.02 billion, or 82 cents a share, in the year-earlier period.
Sales over the period rose 9 percent to $6.06 billion, from $5.57 billion in the first quarter of 1997.
Merck said sales growth was muted by weak currency exchange rates, the divestiture of its crop protection business, and the formation of its Merial joint venture in the third quarter of 1997. Without these activities, Merck said, first quarter sales increased 12 percent from a year ago.
Sales outside the United States accounted for 25 percent of total first quarter sales, compared with 29 percent a year ago. Overall sales of human health products rose 10 percent.
"Income growth for the quarter was driven by strong overall unit volume gains," said Raymond Gilmartin, Merck's chairman, president and chief executive officer.
"The unfavorable effects of inflation, net of price, and exchange were partially offset by cost controls and productivity improvements in manufacturing, selling and general and administrative expenses."
Shares of Merck (MRK) fell 3-3/8 to 120-1/8, a 2.73 percent decline, in Thursday composite trading on the New York Stock Exchange.
Merck said its first-quarter results were galvanized by robust sales of its recently approved cholesterol-lowering drug, Zocor, and by other popular pharmaceuticals such as Crixivan, a protease inhibitor used in the treatment of HIV infection.
Varivax, the only chickenpox vaccine available in the United States, and Vaqta, a vaccine against Hepatitis A, also enjoyed continued sales growth, Merck reported.
Varivax benefitted from expanded coverage under the Federal Vaccines for Children Program, and new rules that require children entering schools and daycare centers to get the vaccine.
Growth in pre-tax income, Merck said, was reduced by its share of tax increases connected to the Astra Merck joint venture, a European vaccine joint venture with Pasteur Mirieux Connaught and the international operations of the Merial joint venture.
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Merck
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