Merck, Schering-Plough Post Profit Jumps

Diane Sullivan, attorney for Merck & Co., holds up a package of Vioxx during opening arguments in Atlantic City, N.J., in this Jan. 22, 2007 file photo. Plaintiffs Mike Humeston, of Boise, Idaho, and the estate of Brian Hermans, represented by his sister, Kathleen Messerschmidt, of Green Bay, Wis., are suing Vioxx maker Merck & Co. for heart attacks they blame on the since withdrawn painkiller. Drug developer Merck & Co. said Monday, July 23, 2007 its second-quarter profit jumped nearly 12 percent on an across-the-board rise in drug sales, and the company boosted earnings guidance for the year. However, it took another charge to cover costs of its massive Vioxx litigation. (AP Photo/Mary Godleski, file) (Mary Godleski - AP)

"The company is progressing well in the five-year plan it set for itself in December of 2005," J.P. Morgan Securities analyst Roberto Cuca wrote.

Tooley said he remains impressed with Merck's cost-cutting progress and growth in both the top and bottom line _ despite the comparison to a year ago, when Merck still had quarterly Zocor sales of about $1 billion.

Merck took a charge of $210 million to boost to $810 million its reserve for defending against lawsuits over Vioxx, the painkiller it pulled from the market in 2004 after research showed it doubled cardiovascular risks. The company expects the reserve to cover legal costs through 2008.

The number of pending personal injury lawsuits against Merck over Vioxx declined slightly, to about 26,950, as some claims were dismissed.

Merck raised its 2007 profit forecast to between $3 and $3.10 per share, excluding 15-20 cents for restructuring and layoff charges, and raised its sales forecast by about $1.1 billion.

At Kenilworth, N.J.-based Schering-Plough, net income jumped 118 percent to $517 million, or 34 cents per share, from $237 million, or 16 cents per share, a year ago. Excluding charges related to a licensing payment and the planned acquisition of Organon BioSciences NV by year's end, the company would have earned 41 cents per share. Sales grew 13 percent to $3.18 billion, mainly on the strength of Vytorin and Zetia. The joint venture brought it $490 million in equity income.

Analysts expected a profit of 35 cents per share excluding one-time items on sales of $3.07 billion.

Despite the profit jump and the company beating analysts' expectations, Schering-Plough shares slipped 19 cents to $31.30 after rising as high as $32.50 earlier in the session. Its 52-week high is $33.81.

Analyst Steve Brozak of WBB Securities said the report "was anticlimactic" given investors' high expectations and the lack of any new growth initiatives.

"You have to tell people how you're going to knock the cover off the ball going into the future," Brozak said.

Unlike other major drug companies, Schering-Plough does not give profit forecasts and has not since turnaround expert Fred Hassan was brought in as CEO four years ago to salvage the then-struggling company.

Chris Schott of Bank of America Securities wrote in a research note that the Organon acquisition "represents a catalyst" that should add to earnings and further diversify profits away from the cholesterol drugs, which now represent about 65 percent of earnings.

"Seven out of our 10 largest-selling products, including Vytorin and Zetia, posted double-digit sales growth for the quarter," Hassan told analysts Monday.

They include Remicade, for arthritis and other inflammatory immune disorders, up 28 percent to $394 million, and Nasonex, for allergies, up 22 percent to $295 million.

The company's consumer health care segment posted $394 million in sales, up 13 percent, while sales in the animal health segment increased 10 percent to $264 million.

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AP Business Writer Jeffrey Gold in Newark contributed to this story.