Merck posts strong FY09, Q4, launches restructuring program

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Merck has reported strong financial results for the fourth quarter and the full year of 2009, which include the results of legacy Schering-Plough operations from the close of the merger on Nov. 3, 2009, through Dec. 31, 2009.

The Whitehouse, N.J.-based company posted a net income $6.53 billion in the 2009 fourth quarter, compared with $1.68 billion in the previous year comparable quarter. In 2009, Merck recorded a net income of $13.02 billion, representing 64 percent increase over a net income of $7.93 billion in 2008.

For the fourth quarter of 2009, the overall sales were $10.09 billion, a 67 percent increase over the $6.03 billion in sales in the previous-year fourth quarter. In 2009, Merck said its sales were $27.43 billion, compared $23.85 billion in the fiscal year of 2008—a 15 percent increase.

In its cardiovascular unit, Merck said its global sales of Zetia (ezetimibe) and Vytorin (ezetimibe/simvastatin) were $614 million and $577 million in the fourth quarter, respectively. Annual worldwide sales for 2009 were $2.2 billion for Zetia and $2.1 billion for Vytorin. Prior to the completion of the merger, $3.5 billion of those combined sales were recorded through the Merck/Schering-Plough partnership and the results from the company's interest in the partnership were recorded in equity income from affiliates. As a result of the merger completion, the Merck/Schering-Plough partnership is now wholly-owned by Merck. Accordingly, the post-merger $399 million and $384 million in revenue from Zetia and Vytorin, respectively, are reflected in fourth quarter sales, according to the company.

For the diabetes and obesity unit, Merck said Januvia (sitagliptin), its DPP-4 inhibitor for the treatment of type 2 diabetes, recorded worldwide sales of $558 million during the fourth quarter of 2009, representing a 35 percent increase compared with the same quarter in 2008.

Janumet (sitagliptin/metformin hydrochloride), a single tablet that targets defects of type 2 diabetes, achieved global sales of $202 million during the quarter, an increase of 69 percent compared with the 2008 fourth quarter. The Januvia/Janumet combined franchise had sales of $760 million during the fourth quarter of 2009, an increase of 43 percent compared to the same quarter in 2008. Januvia reached $1.9 billion in global sales in 2009, while Janumet achieved $658 million in global sales for the year.

Global sales of Merck's antihypertensive medicines, Cozaar (losartan potassium) and Hyzaar (losartan potassium and hydrochlorothiazide), were $955 million for the fourth quarter of 2009, representing an 8 percent increase compared with the fourth quarter of 2008, according to the company. Full-year worldwide sales for Cozaar/Hyzaar were $3.6 billion, comparable with the full year of 2008.

However, Merck noted that it expects a “significant decline in future Cozaar/Hyzaar sales since there are multiple sources of generics expected for these medicines when both lose marketing exclusivity in the U.S. in April and Cozaar loses patent protection in major European markets during the first quarter.”

The company also announced the first phase of a global merger restructuring program, designed to yield annual savings in 2012 of approximately $2.6 billion to $3 billion. Also, other savings through non-restructuring related activities, such as procurement savings initiatives will contribute to the $3.5 billion synergy target.

As of Dec. 31, 2009, Merck had approximately 100,000 employees. As part of the first phase of its merger restructuring program, by the end of 2012, the company expects to reduce its total workforce by approximately 15 percent across all areas of the combined company worldwide. The company also plans to eliminate approximately 2,500 vacant positions as part of the first phase of the program.

The reductions will primarily come from the elimination of duplicative positions in sales, administrative and headquarters organizations, as well as from the consolidation of certain manufacturing facilities and research and development operations, according to Merck.

The first phase of the merger restructuring program is expected to be completed by the end of 2012 with total pretax costs estimated at $2.6 billion to $3.3 billion. Costs of $1.5 billion related to these actions, which are primarily employee separation costs, were recorded in the fourth quarter of 2009, the company said.

Merck estimated that approximately 85 percent of the cumulative pretax