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Drug makers in line
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October 21, 1999: 10:58 a.m. ET
Merck sales rise 20%; SmithKline stock falls on European decision
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NEW YORK (CNNfn) - Merck & Co., the largest U.S. pharmaceutical maker, recorded a 13 percent increase in net income Thursday on growing sales of its cholesterol and pain-killing medications as well as strong results at its managed-care unit.
Meanwhile, British-based SmithKline Beecham posted a profit gain in line with expectations. But its stock sank about 11 percent on news that European regulators rejected its new diabetes medicine Avandia, a drug that increases diabetics' sensitivity to naturally produced insulin. Analysts have looked at Avandia as a potentially blockbuster drug for the company.
Whitehouse Station, N.J.-based Merck (MRK), one of the 30 stocks that comprise the Dow Jones industrial average, earned $1.54 billion on a net basis, or 64 cents per diluted share, up from $1.37 billion, or 56 cents per share, in the corresponding period last year.
The latest profits matched the consensus forecast of Wall Street analysts polled by First Call. Pharmaceutical analyst Jeffrey Chaffkin of PaineWebber said sales were better than expected.
"The next four to five quarters, things look very solid for Merck," he said.
Overall sales rose 20 percent to $8.2 billion. Human health product sales rose 13 percent, led by gains of Zocor, a cholesterol-controlling drug, the rheumatoid arthritis medicine Vioxx, and Fosamax, an osteoporosis treatment.
Vioxx went on the market about five months ago, and U.S. doctors so far have written 2 million prescriptions for the pain killer, Merck said. The company said it planned to launch studies later this year to see whether Vioxx can help prevent colon cancer.
The company also cited prescription volume growth at its Merck-Medco Managed Care business. The unit, which has about 50 million members, earlier this month announced a deal with drug store chain Rite Aid Corp. (RAD) to cooperate on selling prescription drugs over the Internet.
Research and development costs rose 15 percent in the quarter to $516 million.
For the first nine months, net income rose 12 percent to $4.32 billion, or $1.79 per diluted share, from $3.85 billion, or $1.57 per share, a year earlier. Sales rose 23 percent to $23.8 billion.
Merck stock fell 1-5/16 to 74-3/8 amid a broad sell-off on Wall Street early Thursday.
SmithKline's Avandia rejected
American depositary receipts of SmithKline Beecham (SBH) dropped 7-1/4 to 60-5/16 in early trading after a European review panel rejected Avandia. SmithKline said the news was a temporary setback and would work to resolve the committee's concerns.
The company is competing with Warner Lambert and Eli Lilly & Co. for control of the world diabetes market. Recently, Warner-Lambert's insulin-sensitizer Rezulin was withdrawn in Europe by licensee Glaxo Wellcome Plc after being linked to a number of deaths in the U.S.
Avandia was introduced in the U.S. in June and so far has recorded sales of $87 million.
The company posted after-tax profit of $540 million, or 44 cents per U.S. share, up from $493 million, or 40 cents per share, in the year-earlier period. The per-share results matched the First Call consensus forecast.
Drugs driving the growth include the antidepressant Paxil/Seroxat, which recorded sales of $471 million during the quarter, and the antiobiotic Augmentin, which recorded sales of $358 million. But overall sales slowed 4 percent to $3.1 million. The company said that higher wholesale buying in the second quarter triggered lower sales in the latest period.
-- staff and wire reports
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