Drugmaker Merck & Co. on Wednesday reported lower first-quarter results and cut its 2013 profit forecast by 15 cents a share.
Merck tried to reassure investors by announcing a huge share buyback, up to $15 billion worth of its stock, but its share price dropped nearly 3 percent in premarket trading after its revenue missed expectations.
Competition from generic versions of its drugs and unfavorable exchange rates — problems hurting most drugmakers these days — hurt Merck.
Merck, based in Whitehouse Station, N.J., said the stronger dollar cut revenue by 2 percent, but the big hit was copycat version of its top seller, asthma and allergy drug Singulair. It got U.S. generic competition last August, and as a result Singulair sales plunged 75 percent in the quarter, to $337 million from $1.34 billion.
The world's third-largest drugmaker by revenue said its first-quarter profit fell 8.3 percent as total revenue tumbled by 9 percent.
Merck, which sells the popular Type 2 diabetes pill Januvia, said net income was $1.59 billion, or 52 cents per share, down from $1.74 billion, or 56 cents per share, a year earlier.
Excluding $992 million in one-time items, mostly acquisition and restructuring charges, income was down 15 percent to $3.59 billion, or 85 cents per share. That was still a nickel better than analysts expected.
Revenue totaled $10.67 billion, down from $11.73 billion. Analysts polled by FactSet, on average, expected revenue of $11.11 billion.
Merck announced it will buy back up to $15 billion in shares, half of it this year and the rest over time. That's in addition to the $772 million worth of shares it bought back from January through April under a prior buyback. That program still has another $1.1 billion in purchases authorized, meaning Merck could repurchase a total of $16.1 billion in shares.
"This share repurchase program, combined with our strong dividend, reinforces our continued commitment to delivering increased value to shareholders," CEO Kenneth Frazier said in a statement.
Other drugmakers, apparently nervous about shareholder sentiment, have been doing the same, even though drug stocks in general have had a significant run-up in the last year or so after languishing for a few years. Merck shares have climbed from just under $30 in August 2011 to a high of $48.63 last month — but they sold for an all-time high of nearly $94 back in October 2000.
In premarket trading Wednesday, shares dropped $1.25, or 2.7 percent, to $45.75.
Total prescription drug sales fell 12 percent to $8.89 billion, as even sales of Januvia — now Merck's top seller — dipped 4 percent to $884 million. Sales of the Gardasil vaccine against sexually transmitted diseases jumped 37 percent to $390 million.
Sales of veterinary medicines rose 2 percent to $840 million and sales of consumer health products such as the Coppertone sun care line increased 3 percent to $571 million.
Meanwhile, Merck said it now expects earnings per share of $3.45 to $3.55, excluding one-time items. In February, it forecast earnings per share of $3.60 to $3.70. At that time, analysts were expecting $3.68 per share.