Merck & Co, Inc announced that earnings per share for the first quarter of 2004 were $0.73, a 7 per cent increase over earnings per share from continuing operations in the same period in 2003. Net income was $1,618.6 million, compared to income from continuing operations of $1,545.0 million in the first quarter of last year. Worldwide sales were $5.6 billion for the quarter.
"We took several actions during the first quarter that enhance our ability to drive long-term growth," said Merck chairman, president and chief executive officer Raymond V. Gilmartin. "In addition to acquiring Aton Pharma and securing several licensing agreements that further bolster our pipeline, we strengthened our global position with the completion of the Banyu Pharmaceutical acquisition."
Total sales increased 1 per cent for the quarter, reflecting strong growth in Merck's major in-line franchises, offset by lower revenues from Merck's relationship with AstraZeneca LP, which were primarily driven by generic competition for Prilosec. Merck's major in-line franchises collectively grew 11 per cent. Overall, first-quarter sales performance included a 5-point favorable effect from foreign exchange. Sales outside of the United States accounted for 42 per cent of first-quarter sales, compared to 38 per cent of sales for the first quarter of 2003.
Marketing and administrative expenses increased 6 per cent compared to the first quarter of 2003. Excluding the impact of $34 million for restructuring costs related to position eliminations, marketing and administrative expenses increased 4 per cent for the quarter. The company is on track to eliminate 4,400 positions worldwide. Approximately 3,800 positions had been eliminated as of March 31. This program, which was announced in October 2003, will be completed by the end of 2004.
Also contributing to Merck's results in the first quarter was other income of $241 million, which includes a $177 million gain on the sale of Merck's 50-percent equity stake in Johnson & Johnson MSD Europe and realized gains on the company's investment portfolios.
The effective tax rate of 30.9 per cent in the first quarter reflects the impact of product mix, changes in the company's tax reserve position and the non-deductibility of the acquired research expense in connection with the Aton acquisition.
Merck complements its internal research program with an aggressive licensing and external alliance strategy across the entire spectrum of collaborations from early research to late-stage compounds, as well as new technologies and targeted acquisitions. Research and development expenses increased 23 per cent during the first quarter, reflecting acquired research resulting from the acquisition of Aton, as well as licensing activities, including the company's collaboration with Lundbeck.
In March, Merck completed its acquisition of Aton, a privately held biotechnology company focusing on the development of novel treatments for cancer and other serious diseases. The acquisition resulted in $125 million of acquired research expense in the first quarter.
In February, Merck and Lundbeck announced an agreement for the exclusive U.S. development and commercialization of gaboxadol, a compound currently in Phase III development for the treatment of sleep disorders. Under the terms of the agreement, Lundbeck received an initial payment of $70 million and may receive up to $200 million in additional milestone payments. Merck and Lundbeck will jointly complete the ongoing Phase III clinical program, with Merck funding the majority of the remaining development activities. The companies anticipate that Merck will file a New Drug Application (NDA) with the U.S. Food and Drug Administration (FDA) between late 2006 and mid-2007. Following FDA approval, the companies plan to co-promote gaboxadol in the United States. Lundbeck will receive a share of gaboxadol sales in the United States.
On March 30, Merck completed its acquisition of Banyu Pharmaceutical Co., Ltd. Full ownership of Banyu enhances Merck's position in Japan, the world's second-largest pharmaceutical market, while simultaneously strengthening the company's position as one of the world's largest research-based pharmaceutical companies. The acquisition of Banyu expands the company's network of wholly owned operations to every major market of the world.