Merck & Co., Inc. suffered minor setback during the year ended December 2006 and its net earnings declined by 4.3 per cent to US$ 4,434 million from $ 4,631 million in the previous year. Its total sales increased by 3 per cent to $ 22,636 million from $ 22,012 million. With short fall in profits, its EPS declined to $2.03 from $ 2.10.
"The impressive sales performance of our newer and in-line products coupled with the rapid uptake of new, first-in-class vaccines and medicines like Gardasil and Januvia, speaks to the strength of our underlying business and product portfolio," said Richard T Clark, chief executive officer and president. "These results clearly set the stage for our performance in 2007 as well as continued progress toward our long-term financial targets."
"During the fourth quarter, we made investments to support the future success of our strategic research and marketing initiatives," Clark continued. "The $1.1 billion acquisition of Sirna is a notable example of this type of investment as RNA interference has the potential to transform the drug discovery and development process."
For the full year of 2006, the gross margin was 73.5 per cent, which reflects a 3.3 per cent unfavourable impact relating to restructuring costs.
Marketing and administrative expenses increased 10% in the fourth quarter of 2006 and 14 per cent for the full year. Included in marketing and administrative expenses for the full year are an additional $598 million reserve added in the third quarter and a $75 million reserve added in the fourth quarter each solely for future legal defence costs for Vioxx litigation. Also included is the $48 million charge for the Fosamax litigation in which 104 cases had been filed against Merck as of December 31. Excluding these costs in 2006, as well as the addition of $295 million for the Vioxx legal defence reserve in 2005, marketing and administrative expenses increased 21 per cent for the fourth quarter and 9 per cent for the year. The results largely reflect the increase in the level of activity to support the launches of three new vaccines and Januvia in the United States.
Research and development expenses were $1.7 billion for the quarter and $4.8 billion for the year, an increase from the comparable period in 2005 of 55 per cent and 24 per cent, respectively. The fourth-quarter and full-year amounts include a $466 million acquired research charge for Sirna. In addition, costs relating to the global restructuring program of $57 million were included for the full year of 2006 and $19 million for the full year of 2005. Excluding the Sirna and restructuring charges, research and development expenses grew 15 per cent for the quarter and 11 per cent for the year.
Merck reaffirms full-year 2007 EPS of $2.51 to $2.59, excluding restructuring charges related to site closures and position eliminations. Merck anticipates reported full-year 2007 EPS of $2.36 to $2.49. The company remains on track to deliver double-digit compound annual EPS growth, excluding one-time items and restructuring charges, by 2010 from the 2005 base.
Zocor, Merck's statin for modifying cholesterol, achieved worldwide sales of $379 million in the fourth quarter, representing a decrease of 65 per cent over the fourth quarter of 2005. Sales for the year were $2.8 billion, a 36 per cent decrease compared to the full year of 2005. Merck's US marketing exclusivity for Zocor expired on June 23, 2006.