Major drug makers' sales suffer in the third quarter
TRENTON, N.J. - Drug makers Merck & Co., Wyeth, and GlaxoSmithKline PLC all posted lower profits for the third quarter yesterday, partly due to the intensifying generic competition weighing on the entire pharmaceutical industry.
And in what it characterized as an advance strike to counteract that and other problems, Merck said it will slash about 7,200 jobs, or nearly 13 percent of its workforce, in its second major restructuring in less than three years.
Merck, which currently has 250 employees at its research center in Boston's Longwood Medical Area, plans to expand its Massachusetts operations as part of the restructuring. Spokesman Ian McConnell said the company is shifting its molecular profiling group from Seattle to Boston by 2009. Merck is also shifting its basic research for the oncology and Bone Respiratory Immunology and Endocrine groups to Boston by year's end. McConnell said the company, which already has partnerships with many Bay State institutions, such as Harvard University and Vertex Pharmaceuticals Inc., also hopes to forge more partnerships with outside groups.
Merck, Wyeth, and GlaxoSmithKline managed to meet or slightly beat analysts' expectations, in part because of benefits from currency exchange rates.
Analysts said the Wyeth drop was mainly because of news that a promising Alzheimer's drug could be delayed.
Merck's third-quarter profit plunged 28 percent, mainly due to a $612 million after-tax restructuring charge. That lowered net income to $1.09 billion, or 51 cents per share, from $1.53 billion, or 70 cents per share, a year earlier.
The after-tax charge includes a $720 million pretax charge for the new restructuring program, much of it for severance costs.
Excluding the $612 million charge, earnings per share would have been 80 cents, 1 cent better than Wall Street expected.
The restructuring is "not a reaction to our performance in 2008 or the economy," chief executive Richard Clark said. "I think it's a competitive advantage" to make the company leaner and more flexible.
Clark said 60 percent of the job cuts will come overseas, and they'll affect workers in sales and marketing, manufacturing, administration, and even basic research. Three research centers will be closed - Seattle, Japan, and Italy - and the company is evaluating which factories will be closed in a few years.
Despite a 4 percent boost from the favorable exchange rates, Merck's revenue was down 2 percent at $5.9 billion; analysts were expecting $6.1 billion.
Sales were hurt by the continuing decline of Merck's cholesterol drugs Vytorin and Zetia, lower sales for nearly all its vaccines, partly related to manufacturing problems, and generic competition for former blockbuster osteoporosis drug Fosamax, which saw sales cut in half this quarter to $354 million.
Wyeth reported a slight drop in its third-quarter profit as it continues with a restructuring program meant to brace for generic competition.
Profit fell to $1.14 billion, or 84 cents per share, from $1.15 billion, or 84 cents per share. Revenue rose 4 percent to $5.83 billion.
Excluding charges, the company earned 90 cents per share. Analysts polled by Thomson Reuters expecting profit of 90 cents per share.
Still, the company tightened its full-year profit guidance, excluding charges, to between $3.49 and $3.55 per share, from a prior range of $3.47 to $3.55.
Earlier this year, blockbuster heartburn drug Protonix lost patent protection, and top-selling antidepressant Effexor will soon face generic competitors as well. So like other drug makers, Wyeth has been focusing on international expansion and diversifying to increase revenue.
Wyeth pharmaceutical sales rose 5 percent to $4.89 billion, despite a 45 percent decline in Protonix sales. Expecting that, Wyeth has already begun a cost-cutting program that could slash up to 10 percent of its 50,000 employees by 2011.
Effexor sales rose 3 percent to $982 million. Sales of Prevnar, a children's pneumococcal vaccine, rose 13 percent to $717 million, but sales of consumer health products fell 5 percent to $679 million. Animal healthcare product sales rose 11 percent to $261 million.
GlaxoSmithKline, the world's second-largest drug maker, posted better-than-expected results as the weak British pound boosted revenue. Net profit dipped 1.8 percent to $2.1 billion. However, revenue jumped 7 percent to 5$9.6 billion. 