Cost cutting delivers results for pharmaceutical firms

AGGRESSIVE COST-cutting delivered results for both Schering-Plough and Eli Lilly in the first quarter, according to figures published yesterday.

However, Merck, which hopes to complete a takeover of Schering-Plough this year, saw earnings depressed by the global downturn and generic competition. Between them, the three companies employ more than 2,000 people in Ireland.

Merck said net income was down 56 per cent to $1.5 billion, (€1.15 billion) while diluted earnings per share more than halved to 67 cents. Merck added it was delaying regulatory filing of a new migraine drug indefinitely after identifying unexpected side effects.

The announcement appeared to underline the need for Merck’s planned $41.1 billion takeover of Schering-Plough, which separately yesterday reported that its net income had more than doubled to $805 million, or 46 cents a share, despite sales falling 6 per cent to $4.4 billion. In the same period last year, it had one-off charges triggered by its purchase of Organon.

Sales at Merck fell 8 per cent to $5.4 billion, with pressure on its leading products including Fosamax for osteoporosis threatened by generic rivals.

Revenues on Gardasil, its cervical cancer vaccine, were also sluggish after an initial round of vaccination in younger girls, difficulties in sales to those in their late teens and early 20s, and the launch in some markets of GlaxoSmithKline’s rival product Cervarix. The company said it was delaying at least into next year its planned 2009 filing for approval with the US Food Drug Administration for Telcagepant, an acute migraine treatment, after identifying liver problems in patients using it in a mid-stage clinical trial.

Merck cut both its full-year US GAAP earnings per share guidance to $2.84-$3.09 and for revenues to $23.2-23.7 billion, excluding the effects of the Schering-Plough combination.

Schering-Plough said its net income was up on efficiency savings and sales in foreign markets despite US declines and currency pressures. Its results were ahead of analyst forecasts. Earlier, Eli Lilly reported higher-than-expected first quarter earnings as it controlled costs and revalued overseas inventory because of the stronger dollar. The results far exceeded Wall Street forecasts, due to a sharp expansion in profit margins from the inventory adjustments. – (Reuters)