Schering-Plough purchase hikes Merck profit
TRENTON, N.J. - February 16, 2010 -- Drugmaker Merck & Co. on Tuesday posted huge jumps in revenue and profit for the fourth quarter, mainly due to its purchase of longtime partner Schering-Plough Corp., but announced plans for a new round of restructuring.
Merck reported net income of $6.49 billion, up from $1.64 billion a year earlier. Along with the addition of a few billion dollars in sales from Schering-Plough products, the big gain was due to $7.8 billion worth of merger-related accounting items.
Merck said its new restructuring program is expected to bring annual savings of $2.6 billion to $3 billion in 2012 - the bulk of its previously announced plan to produce $3.5 billion in synergies by 2012, one of the goals of the merger. The combined company had about 100,000 employees as of Dec. 31 and expects companywide cuts to reduce that by about 15 percent. Another 2,500 jobs now vacant will also be eliminated.
Sales jumped to $10.09 billion from $6.03 billion in the fourth quarter of 2008, fueled by the addition of Schering-Plough products such as allergy medicine Nasonex and higher sales for Merck vaccines and some of its top-selling drugs. Those included asthma and allergy pill Singulair and blood pressure pills Cozaar and Hyzaar.
The Whitehouse Station, N.J., company reported earnings per share of $2.35, or 79 cents excluding all the one-time items. Analysts surveyed by Thomson Reuters were expecting earnings per share of 79 cents, which Merck matched, and slightly lower revenue of $9.7 billion.
The items included a $7.5 billion accounting adjustment from gaining a controlling interest in its partnership with Schering-Plough and a $3.2 billion gain for selling its part of an animal health business to get regulators' approval for the acquisition.
The one-time costs and gains, which also included Merck's ongoing job cuts and other restructuring, amounted to after-tax charges of $4.32 billion, or $1.56 per share.
The report is the first since Merck bought Schering-Plough in November for $41.1 billion, making the combined operation the world's second-biggest pharmaceutical company, behind Pfizer Inc.
"The new Merck is off to an excellent start," Chief Executive Richard T. Clark said in a statement. "We're building momentum in our business while making great progress on integration."
Clark said the company's expanded product portfolio now includes 10 brands with annual sales of more than $1 billion. He noted Merck now is launching a number of new products in major markets around the world and plans more later this year.
For the full year, Merck reported net income of $12.9 billion, or $5.65 per share. That was up 65 percent from $7.81 billion, or $3.63 per share. Revenue climbed 15 percent to $27.43 billion from $23.85 billion.
In premarket trading, Merck shares changed hands at $37.80, up 88 cents, or 2.4 percent, from Friday's close.
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