German drug maker Merck 4th-quarter posts net profit of $78 million from year-ago loss

By George Frey, AP
Tuesday, February 23, 2010

Merck makes 4th quarter net profit of $78 million

FRANKFURT — German drug maker Merck KGaA said Tuesday it made a net profit in the fourth quarter, compared with a loss a year ago, as revenue rose sharply, but shares in the company slumped on a weak outlook and lowered dividend.

Merck, based in Darmstadt, said it earned €56.7 million ($78 million) for the fourth quarter, compared with a loss of €280 million in 2008. The year-ago figures were weighed down by one-time charges associated with its €10.3 billion purchase of Swiss biotech company Serono SA.

Revenue for the October-December period rose nearly 6 percent to more than €2 billion, from €1.92 billion in 2008.

“We are presenting a financial statement for 2009 with which — considering the overall circumstances of last year — we can be satisfied,” Karl-Ludwig Kley, the company’s chief executive, said in the report.

“For 2010, it will be crucial whether the economic recovery trend remains stable. Merck is assuming that the group total revenues should increase by 3 to 7 percent and that the operating result could grow by 20 to 30 percent.”

Merck makes the cancer drug Erbitux and multiple sclerosis treatment Rebif. The company also produces liquid crystal displays for televisions and computer monitors.

Analysts at Bernstein said some of the 2010 guidance from the company is well below consensus despite the “decent” results for 2009 revenue.

“Revenues were solid, but core operating profit and core earnings per share missed consensus. Core operating profit guidance for 2010 is some way below consensus expectations. The company has also cut its proposed dividend from €1.50 per share to €1.00. The reasons for this are unclear,” Bernstein said in a note to clients.

The news sent Merck shares 6.5 percent lower to €60.26 in Frankfurt early afternoon trading, making the stock the biggest decliner on the DAX-30 index of blue chips.

For the full year, Merck earned €366 million in net income, nearly unchanged from 2008. Revenue for 2009 was 2 percent higher at €7.8 billion from €7.6 billion in 2008. The company said it saw charges of €28 million in 2009 relating to the withdrawal from the psoriasis drug Raptiva, while the company saw an €11 million gain from the divestment of a Brazilian unit of its Performance Life Science Chemical division.

In terms of divisions, the company said its Serono pharmaceutical division saw a 6.6 percent increase in 2009 revenue to €5.3 billion despite the withdrawal of Raptiva. It said the growth was mainly attributable to sales of Rebif and Erbitux. Diabetic drugs’ and consumer health care sales also improved.

Merck said liquid crystal sales also improved after a deep lull for the sector in the first quarter of 2009. Merck said despite liquid crystal sales falling 17 percent in 2009 to €733 million, the division’s sales broke the €200 million mark in the third quarter for the first time in a year.

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