|
Merck sparks drug sell-off
|
 |
July 21, 1998: 3:31 p.m. ET
Industry leader depresses sector after warning of higher expenses in 1998
|
NEW YORK (CNNfn) - Drug stocks slumped Tuesday after industry leader Merck & Co. warned profits in the second half of 1998 will be affected by increased spending for research and development, analysts said.
Shares of Merck (MRK) slumped 9-3/8 to 129 in heavy trading on the New York Stock Exchange and pulled the entire sector lower.
Bristol-Myers Squibb (BMY) shares were off 5-1/6 to 120-3/4, American Home Products (AHP) off 2-3/16 at 50-5/8, Schering-Plough (SGP) down 1-1/8 at 101-13/16, and SmithKline Beecham (SBH) off 2-11/16 at 60-7/8.
White House Station, N.J.-based Merck, the nation's largest pharmaceutical maker, reported a 14 percent increase in net income to $1.3 billion, or $1.07 a share, a penny below analysts' consensus estimate according to First Call.
Revenue rose 9 percent to $6.47 billion.
Then, shortly after releasing its second-quarter results, Merck officials told analysts that 1998 earnings would end up at the "lower end" of Wall Street expectations of $4.27 to $4.39 a diluted share.
"The companies are making discretionary decisions now to increase their investments in SG&A and R&D in preparation for good growth in 1999," said Mariola Haggar, analyst at Deutsche Bank Securities.
But other analysts weren't as optimistic about Merck's longer-term outlook, given the number of drug products that will lose patent protection at the end of the decade.
Starting in 2000, five of Merck's U.S. drug patents will begin to expire. They cover such top-selling products as Vasotec, which has racked up quarterly sales of about $710 million, officials said.
Additionally, five newer products -- such as the Propecia treatment for male pattern baldness and Crixivan, a protease inhibitor for the treatment of HIV -- registered "unimpressive" sales in the latest period, said Alex Zisson, pharmaceutical analyst at Hambrecht & Quist.
"We will fully invest in the five new products," said Sharyn Bearse, a Merck spokeswoman.
A few bright spots
Still some of the nation's other top pharmaceutical makers reported increases in second-quarter profits that met expectations.
Bristol Myers said net income in the latest quarter rose 13 percent to $835 million, or 82 cents a share, from $738 million, or 73 cents, matching First Call's consensus estimate.
Sales rose 9 percent to $4.43 billion.
For the first half of the year, net income totaled $1.76 billion, or $1.73 a share, on sales of $8.8 billion.
American Home Products reported profits rose 14 percent to $523.5 million, or 39 cents a share, from $459.1 million, or 35 cents a share, a year earlier. Analysts had anticipated 39 cents.
Sales slipped 5 percent to $3.34 billion.
For the first half, net income totaled $1.5 billion, or $1.13 a share, on $7 billion in sales.
Schering Plough said net income rose 22 percent to $455 million, or 61 cents a share, a penny above the consensus estimate. That compares with $373 million, or 50 cents a share, in the year-ago period.
Sales rose 23 percent to $2.1 billion.
For the six months, net income totaled $905 million, or $1.22 a share, on sales of $4 billion.
|
|
|
|
|
 |
|
