Merck (MRK) reported solid revenues and earnings this morning, meeting analysts’ EPS expectations of $0.79, before taking into account the effect of Merck’s $41 billion merger with Shering-Plough. Including about two months of combined operation, Merck reported net income for the fourth quarter of $6.5 billion and EPS of $2.35. Compared with a year ago, earnings of pre-merger Merck were essentially flat.
Another large drug company, Pfizer Inc. (PFE) reported earlier this month fourth-quarter EPS of $0.49, compared with estimates of $0.50. Pfizer, like Merck, is trying to rationalize its $67 billion merger with Wyeth. Pfizer noted at the time that it was lowering its forecast for 2010 and 2012. Merck plans to announce its forecast for 2010 in April.
Merck and Pfizer are two of the largest pharmaceutical makers in the world, and their results could influence other big pharma companies like GlaxoSmithKline (GSK), Novartis AG (NVS) and even Johnson & Johnson (JNJ).
GlaxoSmithKline (GSK) profited handsomely from the H1N1 vaccine demand, boosting revenue from the vaccine to $1.1 billion in 2009 from just $105 million in 2008. The company also plans to cut expenses by 500 million pounds (about $800 million) by 2012, which could mean a loss of some 4,000 jobs.
Swiss drug maker Novartis (NVS) is acquiring another Swiss company, Alcon Inc. (ACL), in a deal worth about $11.2 billion (about $153 per share) to minority shareholders. Novartis has reached a separate agreement with Nestle, the majority owner (52%) of Alcon, to pay $28.1 billion (about $180 per share) for Nestle’s share. Needless to say, the minority shareholders are not amused, especially because Alcon showed bigger profits in the fourth quarter and expects higher growth in 2010.
Johnson & Johnson (JNJ) has had its ups and downs, but the company’s product pipeline is said to be better than it was a year ago, and one analyst thinks that 2010 EPS will be up nearly 7% from a year ago. The interesting thing about all of these companies is that, with the exception of Johnson & Johnson, all are trying to absorb a merger or make one happen. Companies that can do so are buying product pipelines as their patented drugs near the end of their patent protection.
Today’s good news on profits from Merck is raising most sector shares, but longer-term profits in this sector really seem to depend on being able to keep the product pipeline full and reducing costs.
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