Merck's Earnings Plunge 29 Percent Amid Vioxx Recall

Strategic Insights -

Merck & Company reported a decline in third-quarter earnings due to the recall of its painkiller Vioxx. The company's net income dropped to $1.33 billion, or 60 cents a share, from $1.86 billion, or 82 cents, a year earlier. The decline was the fourth in five quarters, with sales falling 4 percent to $5.54 billion. The initial costs of withdrawing Vioxx from the market reduced net income by $552.6 million, or 25 cents. Despite this, Merck expects earnings to fall to 48-53 cents a share in the current quarter. Shares of Merck lost 14 cents to $31.26.

Key Takeaways:

  • Merck's net income declined to $1.33 billion, or 60 cents a share, from $1.86 billion, or 82 cents, a year earlier.
  • Sales fell 4 percent to $5.54 billion, with Vioxx accounting for 11 percent of the company's sales last year.
  • The initial costs of withdrawing Vioxx from the market reduced net income by $552.6 million, or 25 cents.
  • Merck has not established any reserves for potential liability for the more than 300 Vioxx lawsuits filed by October 15.
  • The company expects earnings to fall to 48-53 cents a share in the current quarter.
  • Eli Lilly & Company reported a 5.7 percent increase in earnings, to $755.2 million, or 69 cents a share, driven by sales of new products like Cymbalta.
  • Lilly also raised the number of its planned job cuts to 1,000, from 575 announced last week.
  • The Schering-Plough Corporation posted its first profit in more than a year with a net income of $26 million in the third quarter.

Statistics:

  • Merck's net income declined by 29 percent in the third quarter.
  • Sales fell 4 percent to $5.54 billion.
  • Vioxx accounted for 11 percent of the company's sales last year.
  • The initial costs of withdrawing Vioxx from the market reduced net income by $552.6 million, or 25 cents.
  • Merck expects earnings to fall to 48-53 cents a share in the current quarter.
  • Eli Lilly's earnings increased by 5.7 percent, to $755.2 million, or 69 cents a share.
  • Lilly's sales rose 4.5 percent, to $3.28 billion from $3.14 billion.
  • The number of Vioxx lawsuits filed by October 15 exceeded 300.

Sources:

  • Merck & Company press release
  • Eli Lilly & Company press release
  • Schering-Plough Corporation press release
  • Thomson Financial analyst survey
  • Associated Press article