Merck Profit Hurt by Vioxx Recall

Merck & Co. (MRK) on Thursday said its quarterly profit fell 28 percent due to last month's recall of its Vioxx arthritis drug, and the company predicted 2004 earnings will fall as much as 11 percent because of the recall.

Merck reported third-quarter earnings of $1.33 billion, or 60 cents per share in the third quarter, compared with $1.86 billion, or 83 cents per share, in the year-ago period.

The Whitehouse Station, N.J.-based firm said the Vioxx recall (search) had a negative effect on earnings of $553 million, including customer returns and writeoffs of inventory. The medicine was withdrawn on Sept. 30 after being linked to heart attacks and strokes.

Merck reported global company sales of $5.5 billion for the quarter, including a $492 million unfavorable effect related to the withdrawal of Vioxx. The medicine had annual sales of $2.5 billion before the recall, making it one of Merck's biggest products.

Merck said it expects fourth-quarter earnings of 48 cents to 53 cents per share, including the negative impact of about $700 million to $750 million in lost sales of Vioxx and other potential recall costs. The company posted earnings of 62 cents per share in the fourth quarter of 2003.

Consequently, Merck said it expects full-year 2004 earnings of $2.59 to $2.64 per share — a decline of 9.5 percent to 11 percent from last year. Before the recall, Merck had expected earnings to grow almost 9 percent.

Merck said the negative impact of the recall will hurt full-year 2004 earnings by 50 cents to 55 cents per share.

Quarterly sales of Merck's osteoporosis treatment Fosamax (search) rose 13 percent to $778 million, while sales of hypertension drugs Cozaar and Hyzaar jumped 14 percent to $706 million.

But sales of the company's biggest product, cholesterol fighter Zocor (search), shrank 13 percent to $1.2 billion, in part because of generic competition outside the United States.

Asthma drug Singulair saw revenue edge up 2 percent to $626 million from the year-ago quarter, when wholesalers stocked up on the popular medicine.