MRK Merck and Co Inc

By Austen Hufford and Peter Loftus 

Drugmaker Merck & Co. posted a revenue decline in its latest quarter as generic competition for some of its top-selling products hurt results, though its sales still exceeded expectations.

Merck's shares rose 2.7% Thursday morning, as the company also issued a financial forecast for 2017 that was in line with analysts' expectations.

Chief Executive Kenneth Frazier said he was confident in Merck's ability to weather uncertainties including potential policy changes in Washington that could affect the drug industry.

Mr. Frazier was one of several pharmaceutical industry executives who met with President Donald Trump at the White House Tuesday, when Mr. Trump said he wanted to bring drug prices down and encourage more drug manufacturing in the U.S. Mr. Frazier said Thursday he expects there will be additional meetings to ensure communication between the industry and the Trump administration.

"The president was really clear his ultimate goal is twofold: one is to create U.S. jobs, and the second one is to ease the cost burden on patients," Mr. Frazier told analysts on a conference call. "But he was also quick to say, he recognizes the importance of this industry and he doesn't want to interfere with incentives in the marketplace for us to continue to take risks and make the kinds of investments that are needed to discover and develop long-term innovation."

Merck's pharmaceutical revenue for the fourth quarter decreased 1.4% to $8.9 billion, driven by the loss of U.S. market exclusivity for skin-infection treatment Cubicin, allergy treatment Nasonex and cholesterol drug Zetia. The company continues to face biosimilar competition for Remicade, a treatment for inflammatory diseases.

The declines were nearly offset by growth in oncology, hepatitis C, diabetes and vaccines.

The drugmaker also released its guidance for the year. For 2017, Merck projects per-share adjusted earnings between $3.72 and $3.87 on revenue between $38.6 billion and $40.1 billion. Analysts polled by Thomson Reuters expect annual earnings per share of $3.85 on revenue of $40.04 billion.

Cancer immunotherapy drug Keytruda posted sales of $483 million in the most recent quarter, compared with $214 million in the same quarter last year.

In October, the drug received U.S. Food and Drug Administration approval as a first-line treatment for certain lung cancer patients, a big-win for the drug as it had typically been used as a secondary-treatment.

Merck is continuing to develop and launch the drug for different types of cancers, and its development program has included more than 30 tumor types and 360 clinical trials. The quarter also took a $625 million charge to settle patent litigation related to the drug.

Research and development costs decreased 4.3% to $1.72 billion.

In all for the quarter, the company posted a profit of $1.18 billion, or 42 cents a share, up from $976 million, or 35 cents a share, a year prior. Excluding restructuring and acquisition-related costs and other items, per-share earnings fell to 89 cents from 93 cents.

Profit rose as the company cut costs and from income tax differences in the quarters.

Sales fell 1% to $10.12 billion. Analysts polled by Thomson Reuters had forecast per-share earnings of 89 cents a share on revenue of $10.22 billion.

Last year, the FDA approved Merck's new treatment, Zepatier, for hepatitis C, the latest entrant in a booming market for drugs for the viral infection -- a market now dominated by Gilead Sciences Inc. Zepatier had sales of $229 million, compared with $164 million in the third quarter and $112 million in the second quarter.

Write to Austen Hufford at austen.hufford@wsj.com and Peter Loftus at peter.loftus@wsj.com

(END) Dow Jones Newswires

February 02, 2017 11:39 ET (16:39 GMT)

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