Merck sees weaker Q3 on divestitures, hepatitis drug competition

Merck & Co. sales fell 4% to $10.5 billion in the third quarter and profit tumbled 20% as the Whitehouse Station, N.J.-based drugmaker faced declining sales of some of its top-selling drugs and the loss of market exclusivity for others, the company reported.

Part of the sales decline was attributable to several divestitures this year, including the sale of its consumer care business to Bayer, and a loss of revenue from a joint venture with AstraZeneca that ended in the first half of the calendar year.

Merck is “making steady progress in our transformation, including divesting noncore assets, reducing our expense base and investing in our promising new product launches and pipeline,” Merck Chairman and CEO Kenneth Frazier said in a statement.

Net income fell to $895 million in the third quarter of 2014, compared to $1.12 billion in the third quarter in 2013.

The pharmaceutical business reported a 4% drop in sales to $9.1 billion in the third quarter of 2014, compared with roughly $9.4 billion in the same quarter a year ago. Merck said it lost market exclusivity for chemotherapy drug Temodar—sales declined 46% to $88 million—and Singulair, which reported a 22% drop in revenue to $218 million.

It also reported lower sales of its hepatitis products due to the recent approval of new drugs. Revenue for Pegintron dropped by 19% to $84 million, while sales of Victrelis went down 78% to $27 million. Earlier this year, Merck said it would spend $3.8 billion to buy Idenix Pharmaceuticals, which is developing new treatments for hepatitis C.

Sales of Gardasil, the company's HPV vaccine, dropped 11% to $590 million because it had received fewer purchases from the public health sector in the U.S.

But its top-selling drug franchise, which is made up of Januvia and Janumet, which both help reduce blood sugar in patients with Type 2 diabetes, saw sales go up by 5% to $1.4 billion in the third quarter. Revenue for Remicade, which is commonly used to treat rheumatoid arthritis, also rose 5% during the same three months, to $604 million.

The consumer-care divestiture to Bayer closed Oct. 1. Merck in May had announced it would sell the business, which includes allergy medicine Claritin and the sunscreen brand Coppertone, to Bayer for $14.2 billion. Sales in this business for the quarter fell 9% to $401 million.

Merck's “other revenues” business unit reported a 56% decrease in sales to $137 million in the third quarter. The company attributed the decline to AstraZeneca's decision to buy out Merck's interest in a joint venture that manufacturers Nexium and Prilosec.

The company said it expects revenue in 2014 between $42.4 billion and $42.8 billion.

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