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U.S. drug makers Merck & Co. (MRK) and Bristol-Myers Squibb Co. (BMY) reported higher third-quarter sales and earnings from continuing operations, helped by reduced costs and higher revenue from major products.
Schering-Plough Corp. (SGP) reported declining sales and profit--though earnings excluding one-time items were up--for what is likely to be its final full quarter as a stand-alone company. Schering has agreed to be acquired by Merck in a deal seen closing by the end of the year.
The pharmaceutical industry continues to face challenges such as intense competition from generic drugs, difficulties bringing new drugs to market, and the broader economic weakness. U.S. health-overhaul legislation also has fueled uncertainty about the sector. But some companies have been able to increase earnings through cost cuts and boosting sales of current blockbusters, while doing deals to bolster research pipelines.
For the quarter, most large drug companies met or exceeded Wall Street earnings expectations, even if some had declining pharmaceutical revenue or missed revenue expectations.
Market reaction was muted Thursday. Shares of Bristol-Myers declined 1.7%, while Merck and Schering-Plough were up slightly.
While Merck and Bristol-Myers both had improved results, the rivals are pursuing very different strategies. Merck has chosen to address its challenges by getting substantially larger and diversifying into nonprescription drug businesses with its purchase of Schering.
Bristol, in contrast, has chosen small--by shedding nonpharmaceutical assets and using the proceeds to fund its drug-research efforts. "Only time will tell which of these strategies is best," Bristol-Myers Chief Executive James Cornelius told reporters on a conference call.
For the three months ended Sept. 30, Merck's profit more than tripled to $3.4 billion, or $1.61 a share, from $1.09 billion, or 51 cents a share, a year earlier. The latest quarter included a large gain from Merck's sale of its 50% interest in the Merial animal-health joint venture with Sanofi-Aventis SA (SNY); excluding items in both periods, earnings rose to 90 cents a share from 80 cents.
Merck sales rose 2% to $6.05 billion, with negative currency-exchange rates reducing growth by 3 percentage points. Merck's biggest drug, Singulair for asthma and allergies, had sales of $1.09 billion, up 5%, continuing a rebound that started earlier in the year. Other products posting gains included drugs for diabetes and HIV, while sales of hypertension drugs declined.
Sales of Merck's Gardasil cervical-cancer vaccine dropped 22% to $311 million, as Merck continues to have difficulty persuading women ages 19 to 26 to get the shot. Gardasil was recently approved by U.S. regulators for use in boys and men to prevent genital warts, but a tepid recommendation from government advisers this week is expected to limit its uptake in males.
Merck's cholesterol-drug joint venture with Schering-Plough--which sells Vytorin and Zetia--continued to be under pressure due to studies last year raising questions about their effectiveness and safety. Pressure could mount next month when researchers present the findings of a clinical trial comparing Zetia with Abbott Laboratories' (ABT) Niaspan. The results aren't yet known, but many on Wall Street suspect they will be negative for Zetia--a perception reinforced Thursday when Merck executives tried to play down the importance of the trial.
Schering-Plough's earnings dropped to $515 million, or 29 cents a share, from $614 million, or 35 cents a share, a year earlier. Excluding acquisition-related charges and other items, earnings rose to 40 cents from 39 cents.
Net sales fell 1.7% to $4.5 billion, reflecting a 6-percentage-point hit from currency changes.
Among Schering-Plough's noncholesterol treatments, sales of arthritis drug Remicade rose 8% to $608 million, while allergy treatment Nasonex saw a 3% increase.
Schering's animal-health product sales declined 12% to $669 million, with Schering citing a difficult economic environment and other factors. Consumer-health sales were roughly flat with a year earlier at $282 million.
Bristol-Myers' third-quarter profit fell to $966 million, or 48 cents a share, from $2.58 billion, or $1.28 a share, a year earlier. The prior year included the $2 billion gain from selling its ConvaTec wound-care business. Excluding restructuring and other items, earnings from continuing operations rose to 52 cents from 45 cents.
Net sales rose 4% to $5.49 billion. Sales of the blockbuster Plavix anticlotting agent were up 8% to $1.55 billion, despite facing increasing availability of generic copycat versions in Europe. Abilify, an antipsychotic treatment, posted a 16% gain.
-By Peter Loftus, Dow Jones Newswires; 215-656-8289; firstname.lastname@example.org