Drugmaker Merck & Co. said Friday that its first-quarter profit jumped 67 percent despite lower-than-expected sales, due to lower spending on production, marketing and research as well as an arbitration charge a year ago.
The maker of Singulair for asthma and allergies said net income was $1.74 billion, or 56 cents per share, up from $1.04 billion, or 34 cents per share, a year earlier.
Excluding one-time items such as integration of acquired businesses, Merck would have earned $3.04 billion, or 99 cents per share, up from $2.86 billion, or 92 cents per share, in 2011's first quarter. Analysts polled by FactSet expected 98 cents.
Revenue was $11.73 billion, up 1.3 percent from $11.58 billion. Analysts expected $11.83 billion.
Merck reiterated its 2012 profit forecast, for $3.75 to $3.85 per share, excluding one-time items.
In early trading, Merck shares rose 27 cents to $38.74.
"This quarter shows a strong start in a year in which we intend to overcome a major patent (expiration)," for top seller Singulair, Kenneth C. Frazier, Merck's CEO and chairman, told analysts during a conference call.
The popular pill brought in $5.5 billion last year, but loses its U.S. patent on Aug. 3. The patent has already expired in Canada and Mexico, but Singulair has market exclusivity in major European countries through next February and in Japan, the world's second-biggest market for prescription drugs after the U.S., through 2016.
Merck, the world's third-biggest drugmaker, said it expects full-year revenue to be at or near last year's total, $48.05 billion. The company has a good track record of boosting revenue from newer products to offset losses to generic competition for blockbusters, particularly with cholesterol drug Zocor and osteoporosis pill Fosamax.
Frazier noted Merck is on track to apply for approval of five new products between now and the end of 2013, including new types of drugs for osteoporosis, insomnia and cholesterol problems and an improved version of Gardail, its vaccine against cancer-causing human papilloma virus.
Still, Chief Financial Officer Peter Kellogg said the second quarter will be Merck's strongest this year. That's because Singulair sales rise during the spring allergy season, and it will be the last quarter before generic rivals hit the market.
In a note to investors, BernsteinResearch analyst Dr. Tim Anderson wrote that Merck's story "is not terribly exciting" right now but that the company is "still a well-run organization that likely has better future pipeline" prospects than its peers. He noted that the pipeline of experimental drugs has "not delivered much" since 2007, though.
Prescription drug sales rose 3 percent in the latest quarter to $10.08 billion, led by Singulair at $1.34 billion and jumps of about 25 percent for diabetes pills Januvia and Janumet. Together, they brought in $1.31 billion, helping make up for generic competition continuing to slash sales of former blockbusters Cozaar and Hyzaar, for high blood presure. Gardasil and HIV drug Isentress both had double-digit sales growth.
Merck recently got U.S. approval to sell an extended-release version of Janumet, which combines Januvia and a widely used generic pill, metformin.
Sales of veterinary medicines and vaccines jumped 8 percent to $821 million on higher sales of pet and cattle products. Sales of consumer health products, including the Coppertone sun care and Dr. Scholl's foot care lines, rose 7 percent, to $554 million.
Analysts have been wondering whether Merck might be considering selling either of those businesses, particularly after Pfizer Inc. on Monday it agreed to sell its infant nutrition business to Swiss food and drink giant Nestle SA for $11.85 billion.
Asked by an analyst whether Merck is committed to keeping the two businesses, he said they complement the prescription drug business and are part of its strategy of creating long-term shareholder value.
In last year's quarter, Merck took a charge of $500 million to end arbitration with health care giant Johnson & Johnson over rights to immune disorder drugs Remicade and Simponi, blockbusters with several billion dollars in annual sales.
J&J had sold them jointly with Schering-Plough Corp., but after Merck bought Schering in November 2009, J&J sought worldwide rights to their sales. Under the arbitration settlement, Merck also gave up rights to sell the drugs in several regions, reducing its revenue from the two injectable drugs in the quarter by 26 percent, to $519 million.