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Merck & Co. (MRK) reported a 67% increase in first-quarter profit on lower costs, while a deceleration in sales growth for blockbuster diabetes drug Januvia and a decline in alliance revenue contributed to modest overall revenue growth.
The Whitehouse Station, N.J., drug maker also reaffirmed its full-year 2012 earnings targets.
Merck shares rose 12 cents, or 0.3%, to $38.58 in recent trading.
Merck, like its rivals, has been cutting costs as part of an effort to soften the hit from increased generic competition. The company's top-selling allergy and asthma medication Singulair loses patent exclusivity in August.
Chief Executive Kenneth Frazier said the drug industry is facing challenges due to patent expirations and continued uncertainty in the global economy. But he said Merck intends to overcome the impact of the Singulair patent loss and maintain 2012 revenue at or near 2011 levels, excluding effects of currency rates.
Frazier said Merck was on track to seek regulatory approval for at least five major new products this year and in 2013, including potential treatments for osteoporosis, insomnia and a next-generation vaccine against a cancer-causing virus. In addition, Merck recently agreed to license an experimental ovarian-cancer treatment from Endocyte Inc. (ECYT), and Frazier said Merck expects to submit the drug for European regulatory approval later this year.
"We believe our [research-and-development] pipeline is the most under-valued and under-appreciated part of our business," he said.
Analysts said Merck's first-quarter results were roughly in line with expectations, and prospects for the company's stock will hinge upon clinical data and regulatory actions arising out of Merck's R&D efforts.
For the first quarter, Merck earned $1.74 billion, or 56 cents a share, versus $1.04 billion, or 34 cents a share, a year earlier. The latest and year-earlier quarters included acquisition and restructuring costs; the year-earlier period also included a $500 million charge related to Merck's settlement with Johnson & Johnson (JNJ) regarding rights to the anti-inflammatory drug Remicade.
Excluding items in both periods, earnings rose to 99 cents a share from 92 cents a share a year ago, and topped the mean estimate of analysts surveyed by Thomson Reuters by a penny.
First-quarter sales rose 1% to $11.73 billion, falling short of the Thomson estimate of $11.8 billion.
Negative currency-exchange trends reduced sales by 1%. Another source of pressure was a 43% decline in Merck's alliance revenue, miscellaneous corporate revenue and third-party manufacturing sales. This included a decline in revenue from Merck's partnership with AstraZeneca PLC (AZN).
Sales of Singulair rose 1% to $1.34 billion. Merck said the drug was already facing generic competition in some countries outside the U.S.
Sales of Januvia rose 24% to $919 million. Though year-over-year sales growth was strong, the growth rate decelerated from last year's full-year sales growth of 39%. Merck said it didn't book supply sales to its Japanese marketing partner for Januvia in the first quarter because it books such sales every other quarter. A related drug, Janumet, had sales of $392 million, up 29%.
Sales of Gardasil, a vaccine to protect against a cancer-causing virus, rose 33% to $284 million.
Sales of cholesterol drug Zetia rose 6%, while a related drug, Vytorin, declined 8%. Sales of Remicade tumbled 31% as a result of Merck's transfer of marketing rights for the drug in certain regions to J&J under last year's settlement.
Merck's consumer-care sales rose 7% to $554 million, while animal-health sales rose 8% to $821 million.
Frazier said the animal-health and consumer-care units were complementary to Merck's core pharmaceutical business, which indicates Merck is unlikely to follow some rivals including Pfizer Inc. (PFE) in shedding certain non-pharmaceutical assets.
--By Peter Loftus, Dow Jones Newswires; +1-215-982-5581; firstname.lastname@example.org
--Melodie Warner contributed to this article.