Merck & Co's worldwide sales increased only by one per cent to $5.8 billion for the quarter ended March 2008. Foreign exchange favourably affected global sales performance by 4 percent for the quarter. Net income for the first quarter of 2008 was $3,302.6 million compared with $1,704.3 million in the first quarter of 2007. Its earnings per share (EPS) of $0.89 for the first quarter of 2008, excluding a $1.4 billion net after tax gain from a distribution received from the AstraZeneca limited partnership and restructuring charges.
"Our reaffirmation of 2008 financial guidance shows that Merck has the right strategy in place to manage through difficult industry dynamics and unexpected challenges," said Richard T Clark, chairman, president and chief executive officer. "Merck posted solid first quarter results despite the loss of patent protection for Fosamax, as well as a decline in expected sales from our Merck/Schering-Plough joint venture.
"The 'Plan to Win' effort we began back in 2005 has allowed us to improve efficiencies while at the same time growing the top line," Clark said. "But make no mistake - we are not content. Even though several of our plans to win initiatives are ahead of schedule, we are picking up the pace of change," Clark added. "We are accelerating plans to optimize our cost base, transform our business model and maximize performance across all of our products".
Materials and production costs reached at $1.2 billion for the quarter, a decrease of 19 per cent from the first quarter of 2007. The first-quarter 2008 and first-quarter 2007 costs include $15 million and $118 million, respectively, for costs associated with the global restructuring programme. The gross margin was 78.7 per cent for the first quarter of 2008 and 73.6 per cent for the first quarter of 2007, reflecting 0.3 and 2.0 percentage point unfavourable impacts, respectively, relating to the restructuring costs noted above.
Marketing and administrative expenses were $1.9 billion for the first quarter of 2008, an increase of 3 per cent from the first quarter of 2007. Included in marketing and administrative expenses in the first quarter of 2008 are $40 million in reserves solely for future legal defense costs for litigation related to Fosamax (alendronate sodium).
Research and development expenses were $1.1 billion for the quarter increases of 5 per cent from the first quarter of 2007. Restructuring costs, primarily representing employee separation costs associated with the company's global restructuring programme, net of gains on the sales of facilities and related assets were $70 million for the first quarter of 2008.
Total overall costs associated with the company's global restructuring program included in materials and production and restructuring costs were $85 million and $186 million for the first quarter of 2008 and 2007, respectively, primarily related to separations, accelerated depreciation and asset impairment costs.
Merck anticipates a full-year 2008 non-GAAP EPS range of $3.28 to $3.38 that adjusts for certain items and a 2008 GAAP EPS range of $3.84 to $4.00. The company expects a generally even distribution of non-GAAP EPS across the remaining quarters in 2008. Both the non-GAAP and GAAP EPS ranges include a $700 million reduction in equity income guidance, attributable to the lower-than-anticipated contribution from the Merck/Schering-Plough joint venture, as well as updates to other guidance elements to reflect current business trends.
Worldwide sales of Singulair (montelukast sodium), a once-a-day oral medicine indicated for the chronic treatment of asthma and the relief of symptoms of allergic rhinitis, were $1.1 billion for the first quarter of 2008, increase of 10 percent compared with the first quarter of 2007. Singulair continues to be the No. 1 prescribed product in the US respiratory market.