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Tuesday, 22 January, 2002, 17:59 GMT
Cost cuts help Merck secure profits
Some of the company's drugs failed to meet market's expectations
US drug maker Merck has posted a 5% rise in profits as cost-cutting helped offset slowing sales growth of the arthritis medication Vioxx, and competition from makers of generic drugs.

New Jersey-based Merck reported earnings of $1.86bn (1.29bn) or $0.81 per share over the last three months of 2001, meeting market expectations.

They did so on the back of lower marketing and administrative expenses, which is concerning

Richard Evans, Sanford Bernstein

The company's results were helped by a cost-cutting drive which saw Merck shave marketing and administrative expenses by 12% over the three months.

And the announcement comes a month after Merck shocked Wall Street by warning of flat profits for 2002, as makers of generic medicines continued to eat away at its prescription drug sales.

"They basically met lowered [earnings] expectations, but they did so on the back of lower marketing and administrative expenses, which is concerning," said analyst Richard Evans of Sanford Bernstein.

Patents expire

Merck profits were hit by patent expirations last year on hypertension treatment Vasotec and ulcer medicine Pepcid.

Two further drugs - hypertension drug Prinivil and ulcer drug Prilosec, could lose their marketing exclusivity this year.

While Merck's net sales were 10% higher over the quarter than a year earlier, to $12.6bn, sales of Vasotec and Pepcid continued to decline.

Great expectations

Sales of Vioxx, which the market had hoped could offset falling sales of drugs going off patent, were 21% lower over the three months than in the same period in 2000.

For the year, sales of Vioxx fell $100m short of the company's maximum sales forecast of $2.6bn.

Sales growth for Vioxx has been hurt by lingering claims that the drug may slightly increase the risk of blood clots and by the refusal of many insurers to pay for the expensive medication.

Recall boost

Sales of three of the company's key newer medicines - osteoporosis treatment Fosamax, asthma medicine Singulair and cholesterol fighter Zocor - enjoyed stronger sales growth.

Zocor sales were boosted by a recall of Baycol, a rival drug produced by Bayer, over safety concerns.

At 1700 GMT, Merck shares were $0.79 up at $58.79 in New York trading.

The stock hit a 52-week low of $56.80 after last month's profits warning.

See also:

11 Dec 01 | Business
Merck sees flat earnings
20 Jul 01 | Business
Merck's profits up, but growth slows
22 Jun 01 | Business
Drug giant warns of lower profits
20 Apr 01 | Business
New drugs boost Merck's profits
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