By Ransdell Pierson and Lewis Krauskopf
NEW YORK (Reuters) - MERCK (MRK.NY)& Co
The drugmaker, whose shares fell 2.5 percent, projected flat or little 2009 growth for sales of three major products: asthma medicine Singulair, blood-pressure drug Cozaar, and cervical cancer vaccine Gardasil.
"The hit to the bottom line from currency is a little bit larger than people would have expected," Edward Jones analyst Linda Bannister said of the 6 percent drag on earnings Merck expects from unfavorable currency trends. "For short-term investors, that's definitely an issue and something to monitor across all of the pharmaceutical companies."
Merck Chief Financial Officer Peter Kellogg also told analysts on a conference call that he expects combined global sales of its Vytorin and Zetia cholesterol fighters, which it sells in partnership with Schering-Plow
On the positive side, Merck projected strong growth for its relatively new Januvia diabetes franchise, as well as for its HIV drug Isentress and shingles vaccine Zostavax. The company also expects to seek approval next year for two new medicines for migraines and acute heart failure.
Merck shares have fallen more sharply than rival drugmakers this year as it has seen demand for Singulair and its cholesterol drugs falter over safety or effectiveness worries, and as Gardasil endures competition from GlaxoSmithKline's
The New Jersey-based drugmaker, which also faces looming generic exposure to Singulair and Cozaar, said in October it was slashing 7,200 positions, on top of a major earlier restructuring.
Merck, a component of the Dow Jones industrial average, said on Thursday it expected 2009 earnings, excluding special items, of $3.15 to $3.30 per share. Analysts polled by Reuters Estimates were expecting $3.52, on average. The 2009 forecast excludes restructuring charges of $400 million to $600 million.
Merck said it expects global sales next year of $23.7 billion to $24.2 billion, little changed from expected 2008 revenue and shy of the $24.7 billion expected by analysts. The strengthening dollar is expected to crimp 2009 revenue by 3 percentage points, Merck said.
"We anticipate that top-line growth will be offset by the effects of a volatile global economy, fluctuations in the foreign exchange markets, as well as continued challenges for certain key products," Merck CEO Richard Clark said in a statement.
Kellogg said the weak economy would hurt the sales volume of its products next year -- a signal that the drug industry is not recession-proof.
Merck's forecasts for Gardasil and Singulair were particularly disappointing, said Bannister of Edward Jones, adding that Gardasil growth will be critical for Merck to survive looming patent expirations.
Revenue of U.S. drugmakers in recent years has been greatly bolstered by a weak dollar, which increases the value of overseas sales when converted back into U.S. currency. But the stronger dollar may now turn currency trends against the companies.
Even so, Merck stuck to its earlier long-range forecast of compound earnings per share growth in the mid-to-high single digit range from 2005 to 2010, excluding special items. It also backed its 2008 forecast of $3.28 to $3.32 per share, excluding items.
The company, whose shares have fallen some 55 percent this year, said it would maintain its dividend and pursue stock buybacks next year, touting its strong balance sheet.
"Pretty much across the board the valuation looks attractive even with the downgrade in earnings," said Eldene Doyle, an equity analyst with Merck shareholder Optique Capital Management, noting Merck's strong cash flow and balance sheet.
Merck shares fell 65 cents to $25.81 in morning trading on the New York Stock Exchange.
(Reporting by Ransdell Pierson and Lewis Krauskopf; Editing by Lisa Von Ahn, Dave Zimmerman)
