Merck & Co. swung to a fourth-quarter profit because of lower restructuring and other charges and higher sales of most of its key drugs.
The world's third-biggest drugmaker forecast little improvement this year, when its top-selling drug, allergy and asthma medicine Singulair, will get U.S. competition from cheaper generic versions. Merck executives also said increased pressure for lower drug prices, now in some key emerging markets as well as the European Union, and a shift to unfavorable exchange rates will hurt revenue this year.
Other drugmakers reporting results in the past two weeks gave the same outlook.
Merck, the maker of the cervical cancer vaccine Gardasil and diabetes blockbusters Januvia and Janumet, said Thursday that net income was $1.51 billion, or 49 cents per share. A year earlier, Merck lost $531 million, or 17 cents a share.
Adjusted income was $2.98 billion, or 97 cents a share. That topped expectations for 95 cents per share, according to FactSet.
Revenue rose 1.6 percent $12.29 billion, $200 million below expectations.
"We had a good quarter and a strong overall year," CEO Kenneth Frazier told analysts on a conference call. "We are committed to strong operational growth despite challenges such as the Singulair patent expiration."
He said Merck has some newly approved drugs launching in various countries. The company recently got approval to market HIV drug Isentress and cholesterol drug Vytorin to additional patient groups, and plans during 2012 and 2013 to apply for approval of five major products.
However, last year Merck ended a study of promising blood thinner vorapaxar due to bleeding risks, but continued a second study that excludes patients who have had a stroke, and it halted a study of a Staph infection vaccine because more people in the group getting it were dying.
The company, based in Whitehouse Station, N.J., forecast 2012 earnings per share of $3.75 to $3.85, excluding charges. Analysts expect $3.83. The company expects revenue at or near 2011's total, which was just over $48 billion.
In trading Thursday, Merck shares fell 19 cents to $38.44.
Analysts Linda Bannister of Edward Jones and Dr. Tim Anderson of BernsteinResearch both called it a decent quarter, while Catherine Arnold of Credit Suisse wrote that it was "a solid quarter, driven by good cost controls and lower tax rate."
All three have "Buy" ratings on Merck stock, partly because the company continues to cut jobs and other costs, just increased its dividend 11 percent to 42 cents per share and bought back $1.9 billion worth of shares in 2011.
Pharmaceutical revenue rose 3 percent to $10.76 billion, led by double-digit sales growth for Januvia and Janumet, HIV drug Isentress and Gardasil. Sales rose 8 percent to $1.46 billion for Singulair, whose U.S. patent expires in August.
Late Thursday, the Food and Drug Administration approved Janumet XR, a version of the Januvia-metformin combination taken once a day instead of twice. Merck won approval for Juvisync, the first combination pill for people with both diabetes and high cholesterol, in October, so its Januvia franchise is sure to soon exceed sales of $5 billion a year.
Generic competition hurt sales of several prior blockbusters, including osteoporosis pill Fosamax. Vytorin sales fell 16 percent due to decreased U.S. demand, and sales of shingles vaccine Zostavax slumped 27 percent. Manufacturing problems have limited Zostavax sales for a couple of years, but Merck said it's now filled backorders.
Recently approved hepatitis C drug Victrelis accounted for revenue of $87 million. One of two hepatitis C drugs approved last year that greatly improve the cure rate for the tough-to-treat virus, it's being launched in more countries.
Merck took charges of $1.48 billion for acquisition-related costs and $692 million for restructuring. Both are related to its ongoing integration of fellow New Jersey drugmaker Schering-Plough Corp., which it bought in 2009 for $49 billion. That deal gave Merck Schering's biotech, consumer health and veterinary medicine businesses.
The combined company has been shedding jobs and closing some factories to reduce costs. It's now down to about 86,000 employees worldwide, from the 106,000 the two had right before merging.
Biologic immune disorder drug Remicade saw sales fall 28 percent to $511 million, because of a new, less-favorable revenue sharing agreement with Johnson & Johnson. That followed arbitration after Merck bought Schering-Plough, which had marketed the blockbuster drug jointly with J&J.
Animal health sales rose 6 percent to $868 million. Sales of consumer health products such as nonprescription Claritin fell 5 percent to $361 million, partly due to a mild fall allergy season.
For the full year, Merck posted net income of $6.27 billion, or $2.02 per share, up from $861 million, or 28 cents a share. Revenue totaled $48.05 billion, up 4 percent from $45.99 billion in 2010.
Linda A. Johnson can be followed at http://twitter.com/LindaJ_onPharma