MRK Merck and Co Inc

UNITED PARCEL SERVICE

E-Commerce Offers Brighter Picture

United Parcel Service Inc. reported a 3.2% rose in profit fueled in part by e-commerce growth, but the delivery giant warned that a weaker industrial environment would persist.

Revenue increased 3.8% to $14.63 billion for the second quarter. Profit rose to $1.27 billion. UPS forecast its e-commerce business will grow faster than expected through the end of the year.

The results show that the company's efforts to improve profitability in the higher-cost e-commerce delivery segment are starting to pay off. But the growth in e-commerce and consumer spending was countered by slowing exports due to the greenback's strength and an inventory overhang among industrial customers, which is hurting business-to-business shipments, UPS's traditional stronghold.

Cross-border and export shipment growth in Europe helped fuel international results. Shipments from Europe to the U.S. alone grew at a double-digit pace in the quarter. Operating profit at its international division grew 11.1% to $613 million on nearly flat revenue. UPS has been expanding in Europe and other international markets, and executives said that they would be keeping an eye out for potential acquisitions in emerging markets.

Delivering e-commerce packages tend to be more expensive due to the scattered nature of the residential deliveries and UPS has undertaken several initiatives to produce better returns. It has raised prices across the board, with specific increases targeted at bigger and bulkier packages that fill up trucks and take more time to deliver. The company also has been working to pool more consumer deliveries, adding retail locations and lockers for pickups.

Its proprietary-routing software, Orion, has helped it to shave minutes and miles off drivers' routes. Second-quarter delivery stops grew by more than 3%, but the company reduced its miles driven by a fraction of a percent and kept the cost per piece down. UPS plans to expand the roll out of the technology so that it is ready for the all-important holiday season.

Operating profits in the company's U.S. business increased 2.7% to $1.23 billion.

--Laura Stevens

MERCK & CO.

Cancer Treatments Boost Revenue

Merck & Co. posted an unexpected increase in second-quarter revenue thanks to new cancer and hepatitis treatments, and an increased profit versus a year-earlier period that was weighed down by foreign-exchange losses.

The drugmaker also tightened its full-year 2016 financial forecast, which was mostly in-line with analyst predictions.

Merck is trying to return to consistent sales growth after several years of declines, as older drugs have lost sales to generic competition.

The company is aiming to replace the lost revenue with sales from new products such as the cancer immunotherapy Keytruda and hepatitis C treatment Zepatier, and has cut costs in an effort to bolster profits. But some analysts see a tough road ahead for Merck. Keytruda faces a strong competitor in Bristol-Myers Squibb Co.'s Opdivo cancer immunotherapy, which has generated higher sales. And Merck faces sales declines in coming years for top drugs including cholesterol treatments Vytorin and Zetia, due to generic competition, said Credit Suisse analyst Vamil Divan.

For the quarter, Merck posted a profit of $1.21 billion, up 75% from $687 million a year earlier, when it took a $715 million charge to devalue its assets in inflation-plagued Venezuela. Earnings rose to 43 cents a share from 24 cents a share. Sales grew 0.6% to $9.84 billion.

Excluding restructuring and acquisition-related costs, per-share earnings rose to 93 cents from 86 cents. Analysts polled by Thomson Reuters had forecast per-share earnings of 91 cents a share on revenue of $9.78 billion.

Merck's pharmaceutical revenue increased 1.6% to $8.7 billion for the second quarter, driven by growth in cancer treatments, hospital acute care, cardiovascular treatments and vaccines.

Keytruda, which treats melanoma and lung cancer, posted sales of $314 million in the most recent quarter, compared with $110 million in the same quarter last year. Merck is continuing to develop and launch the drug for different types of cancers; its Keytruda development program includes 30 tumor types across more than 300 clinical trials.

Merck is trying to expand the use of Keytruda to include newly diagnosed lung-cancer patients -- a large market. Merck plans to release full details in the coming months of a study in which Keytruda prolonged survival in such patients, compared with chemotherapy.

"My sense is that these data are quite strong and potentially practice-changing in first-line lung cancer," Merck's head of research, Roger Perlmutter, said in an interview Friday.

In January, the U.S. Food and Drug Administration approvedMerck'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 $112 million, compared with $50 million in the first quarter.

Much of Zepatier's sales so far have come from Merck's contract with the U.S. Department of Veterans Affairs' health-care division, Adam Schechter, head of Merck's pharmaceutical unit, said in an interview.

Sales of allergy treatment Nasonex fell 53% in the first quarter from the year prior. A generic version of the drug became available in the U.S. in March, and the company has said it expects significant losses in future sales.

Sales of Remicade, a treatment for inflammatory diseases, decreased 26% because of a loss of exclusivity and the accelerating impact of competition from lower-cost copies, known as biosimilars, primarily in Europe.

Combined sales of Type 2 diabetes treatments Januvia and Janumet increased 2%, while combined sales of cardiovascular drugs Zetia and Vytorin grew 4% on price increases.

Antibiotic Cubicin posted 22% sales growth to $357 million on price increases, but Merck said it had lost patent protection in June and that it expects a significant decline in sales.

HPV vaccines Gardasil and Gardasil 9 fell 8% to $393 million due to the timing of public sector purchases.

Earlier this month, Merck said it planned to lay off research-and-development workers at three East Coast sites in a shake-up of its early-stage drug-hunting efforts. At the same time, Merck plans to start new laboratories in Cambridge, Mass., and the San Francisco Bay Area, as part of a trend among large drugmakers to try to tap into hot clusters of biotechnology startup activity and academic research.

For the year, Merck now projects per-share adjusted earnings between $3.67 and $3.77 on revenue between $39.1 billion and $40.1 billion. Analysts had expected adjusted earnings of $3.72 a share on revenue of $39.49 billion.

Shares, which have risen 7% in the last three months, increased 0.5% in recent trading.

--Peter Loftus and Austen Hufford

SONY CORP.

Yen's Strength Weighs on Outlook

Sony Corp. reported a net profit on strong PlayStation 4 sales, but it downgraded the outlook for its struggling image-sensor business because of the yen's rapid strengthening.

For the quarter, the Japanese electronics and entertainment giant posted a net profit of Yen21.2 billion ($206 million), buoyed by its upbeat videogame arm. Consumer-electronics units, including smartphones and televisions, contributed smaller profits.

Analysts said they were confident Sony was on track to achieve its goal of an Yen80 billion net profit for this fiscal year ending in March, though they said fluctuating foreign-exchange rates could alter the forecast.

Sony slashed its full fiscal-year revenue forecast by 8.7% to Yen7.4 trillion due to the yen's strength, and said the image-sensor unit would record a wider loss than earlier estimated for the same reason. The Japanese currency has risen this year from around Yen120 to the U.S. dollar in early January to around Yen102 to the dollar Friday.

The image sensors -- a key component for cameras in smartphone -- are made in Japan but largely sold overseas, so the strong yen reduces their profits. Sony experienced a drop in demand from major customer Apple Inc. because of slowing iPhone sales. The image-sensor unit had a Yen43.5 billion operating loss in the quarter.

Still, the overall outcome was a surprise after analysts had on average expected a modest loss. The PlayStation unit recorded an operating profit of Yen44 billion.

Sony suffered significant damage to a factory in Kumamoto in southern Japan after an earthquake there in April. The company said it expected the quake to reduce operating profit in the year ending March 2017 by Yen80 billion, an improvement from the Yen115 billion hit it had estimated in May.

The iPhone slump and yen gains have also hurt other Japanese electronics makers including Sharp Corp., which is set to be taken over soon by Taiwan's Foxconn Technology Group. Sharp, which supplies display panels to Apple, said Friday that it posted a wider-than-expected net loss of Yen27.5 billion in the April-June quarter owing to weak sales of its smartphone screens.

Sony's chief financial officer, Kenichiro Yoshida, said the company would beef up efforts to sell more-lucrative image sensors while cutting production costs. Waseda Business School professor Atsushi Osanai, who previously worked at Sony, said the worst for the sensor business was likely over -- barring sharp currency fluctuations -- because demand was picking up thanks to orders from Chinese makers of affordable handsets.

--Takashi Mochizuki

(END) Dow Jones Newswires

July 30, 2016 02:47 ET (06:47 GMT)

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