NEW YORK – Merck & Co. (MRK) on Thursday reported a drop in second-quarter profit, hurt by a tax charge and the withdrawal last year of its Vioxx (search) arthritis drug.
Total sales fell 9 percent to $5.5 billion, primarily due to the loss of Vioxx revenue, which at one time generated some $2.5 billion in annual revenue.
Legal costs associated with the withdrawn drug are expected to skyrocket, although Merck did not increase its legal reserves during the second quarter.
Merck is facing thousands of product liability lawsuits from patients claiming they were harmed by Vioxx, which was pulled from the market last September after the company determined long-term use of the drug increased the risk of heart attack and stroke.
The company earned a net profit of $721 million, or 33 cents per share, in the second-quarter, compared with $1.77 billion, or 79 cents per share, a year earlier.
Excluding special items, the Whitehouse Station, N.J.-based drugmaker would have earned 62 cents per share, matching the average expectations of analysts, according to a poll by Reuters Estimates.
The company took a $640 million tax charge, amounting to 29 cents per share, related to its planned repatriation of $15 billion in overseas profits.
Shares of Merck were down 50 cents, or 1.6 percent, to $31.35 on the New York Stock Exchange.
Merck said it expects third-quarter earnings of 61 cents to 65 cents per share with full-year profit of $2.44 to $2.52 per share, excluding charges. Wall Street is looking for 63 cents a share for the third quarter and $2.50 for the year.
As of June 30, the company said it has been served or is aware that it has been named as a defendant in about 4,100 lawsuits, which include about 7,500 plaintiff groups, plus some 120 class-action lawsuits.
The first Vioxx trial is currently under way in Texas and Merck said it expects one or more Vioxx suits may go to trial in the second half of this year.
At the end of last year, Merck had established a reserve of $675 million for future Vioxx legal defense costs.
The company recently replaced long-time Chief Executive Raymond Gilmartin with its former head of manufacturing, Richard Clark.
Clark said the company must "increase efforts to reduce Merck's cost structure over and above what has been achieved to date" as well as push for approval of four late-stage experimental vaccines in its pipeline.
Sales of Merck's top-selling cholesterol drug Zocor (search) fell 16 percent to $1.2 billion in the quarter as cheaper versions of the medicine became available in Europe.
Sales of asthma drug Singulair (search) rose 14 percent to $730 million, while worldwide sales of osteoporosis drug Fosamax (search) rose 8 percent to $853 million.
Combined sales of high blood pressure treatments Cozaar and Hyzaar also rose 8 percent $785 million.