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Merck warns on 2Q, year
June 22, 2001: 2:40 p.m. ET

Foreign exchange, disappointing sales of Vioxx will leave it short of guidance
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NEW YORK (CNNfn) - Merck & Co. warned Friday that it will miss second-quarter and full-year earnings forecasts, citing disappointing sales of its arthritis drug Vioxx and foreign exchange woes.

The nation's No. 2 drugmaker said it sees second-quarter earnings of 77 to 79 cents a share, up from 73 cents a share a year earlier, but below Wall Street analysts' estimates of 81 cents a share.

The New Jersey-based company also said it expects full-year earnings of $3.12 to $3.18 a share, versus average estimates of $3.20 a share, according to First Call, which tracks profit analysts' forecasts.

Merck (MRK: down $5.67 to $68.80, Research, Estimates) stock tumbled on the news, pulling the Dow Jones industrial average lower in early trading, while problems at Merck's rivals Schering-Plough (SGP: down $2.57 to $37.98, Research, Estimates) and American Home Products (AHP: down $1.34 to $60.86, Research, Estimates) helped drag the entire drug sector lower.

Vioxx, a new pain relief drug, is not likely to reach the top of its projected sales range because of slower than expected penetration of its class of drugs into the analgesics and arthritis market, the company said.

Merck said the drug should now see sales of $3 billion to $3.5 billion this year, putting it second to Cholesterol-lowering drug Zocor in terms of sales by the company.

The strong dollar can hurt U.S. companies because it erodes the value of sales made in other currencies.

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The profit warning comes after Merck's first-quarter results raised concern on Wall Street about disappointing sales of Vioxx. At the time, Merck tried to quell fears that sales of the arthritis and pain treatment would miss year-end goals, saying quarterly U.S. sales of the drug were hurt because wholesalers needed to buy less after stockpiling ahead of a November price increase.

"I'm not so much surprised in the Vioxx number as I am about their change in earnings guidance," said Richard Evans, an analyst at Sanford Bernstein, according to Reuters.

"The fact that they attributed it to Vioxx is a little disconcerting because I think Vioxx's sales trajectory is exactly what someone familiar with the arthritis market would expect, so it suggests we have to look a little deeper than just Vioxx and foreign exchange," he added.

Whitehouse Station, N.J.-based Merck is the nation's No. 2 drugmaker behind Pfizer Inc. and its stock is one of 30 in the Dow Jones industrial average.

Relying on Vioxx

Merck was relying on strong sales of Vioxx to make up for a slump in sales of hypertension treatment Vasotec, ulcer medicine Pepcid, and Mevacor, a cholesterol fighter; all of whose patents expired this year.

Concerns on Vioxx sales were first raised in April when the company's first-quarter results revealed what many on Wall Street viewed as disappointing sales of the arthritis and pain treatment.

Merck attributed the Vioxx shortfall to slower growth in sales of so-called Cox-2 inhibitor drugs, a class of drugs that Vioxx helped pioneer. Those drugs are not penetrating the market for analgesics and arthritis as quickly as expected, Merck said.

That class of drugs includes the Pharmacia Corp. (PHA: down $2.60 to $48.90, Research, Estimates) blockbuster, Celebrex.

Vioxx generated global sales of $485 million in the first quarter -- well below forecasts by some analysts of up to $650 million -- while global Celebrex sales jumped 24 percent to $649 million. But Pharmacia said its U.S. sales fell, also citing wholesalers stocking up before a price increase.

"People may now expect similar disappointment with sales of Celebrex. And I personally agree that trends for it and Vioxx will move in tandem," said ING Barings analyst Sena Lund. graphic

-- Reuters contributed to this report


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Merck & Co.

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