Merck Posts Loss On Vioxx Settlement

Filed at 4:11 p.m. ET

TRENTON, N.J. (AP) Merck & Co. posted a $1.63 billion fourth-quarter loss Wednesday as a whopping charge for its Vioxx litigation settlement dragged down results.

The maker of allergy and asthma pill Singulair and osteoporosis treatment Fosamax said the net loss amounted to 75 cents per share, compared with a year-ago profit of 22 cents, or $473.9 million.

Mercks fourth-quarter revenues were below analysts expectations and the drug makers share price was off $1.70, about 3.5 percent, to $46.31 in late trading.

The fourth-quarter results included charges totaling $5.8 billion. Those were partly offset by a $1.9 billion reduction in taxes and a $455 million gain from insurance arbitration over coverage for Vioxx litigation.

The charges included $4.85 billion for Mercks pending settlement to end the bulk of lawsuits over Vioxx, the painkiller it pulled from the market in September 2004 due to increased risk of heart attack and stroke.

Merck said as of Jan. 17, more than 57,000 plaintiffs out of about 60,500 had registered for, but not yet committed to, the settlement.

Other charges included $274 million for ongoing restructuring and $671 million for the anticipated resolution of federal and state civil probes into past marketing practices.

Excluding the one-time charges, net income would have been 80 cents per share, 6 cents more than forecast by analysts surveyed by Thomson Financial.

But analysts had forecast revenues of $6.3 billion. Merck delivered only $6.24 billion, with revenues up 3 percent from $6.04 billion a year ago.

The upside was primarily driven by lower costs and a lower tax rate, analyst James Kelly of Goldman Sachs & Co. wrote in a research report.

Merck said sales of cholesterol drugs Vytorin and Zetia, sold under a joint venture with Schering-Plough Corp., totaled $1.5 billion in the fourth quarter, up 34 percent from a year earlier, and $5.2 billion in 2007. Merck recorded $538 million as fourth-quarter equity income.

Merck said it is monitoring the potential financial impact of recent publicity about a study showing Vytorin was no more effective at limiting plaque buildup than one of its components, Zocor, now available as an inexpensive generic drug, although Vytorin did lower bad cholesterol levels a bit more.

The Whitehouse Station-based company said it knows of about 50 potential class action suits alleging consumer fraud in the marketing of Vytorin and Zetia.

Since Merck and Schering-Plough Corp. disclosed partial results of the Vytorin study on Jan. 14, sales reps have visited about 95 percent of top specialists and 90 percent of primary care doctors to discuss Vytorin and Zetia, Chief Executive Officer Richard Clark told analysts during a conference call. He said the company has not yet decided whether it will resume TV ads for the two drugs.

These guys are going to defend Vytorin just as hard as they defended Vioxx, predicted analyst Steve Brozak of WBB Securities.

Chief Financial Officer Peter Kellogg noted patent expirations in 2006 for former blockbuster Zocor and enlarged prostate gland treatment Proscar cut revenues by $2 billion last year.

Despite having that, we still delivered 10 percent revenue growth in 2007, counting the joint venture income, he said in an interview.

However, revenue growth in the fourth quarter all came from favorable currency exchange rates and price hikes. Brozak said there wasnt the predictable growth in U.S. sales, so first-quarter revenues should be closely watched.

Merck reiterated it expects full-year 2008 earnings per share of $3.28 to $3.38, excluding one-time items. Those items include an expected gain of about $2.2 billion as AstraZeneca PLC begins to buy out Mercks share in their long-running joint venture.

For the full year, net income totaled $3.28 billion, or $1.49 per share, down 26 percent from $4.43 billion, or $2.03 per share, in 2006. Revenues totaled $24.2 billion, up 7 percent from $22.6 billion in 2006.

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On the Net: http://www.merck.com

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