On a GAAP basis, Merck reported EPS of $0.38, which includes acquisition-related and restructuring costs and other items. The company took $870 million in restructuring charges in the third quarter.
On October 1, Merck announced that it would fire 8,500 workers, in addition to the 7,500 layoffs it already had planned. Combined the total number of firings represents about 20% of Merck’s headcount of 80,000 employees.
Gross margin fell from 64% in the year-ago quarter to 62.8%, primarily due to restructuring charges and acquisition costs. On a non-GAAP basis, the decline in gross margin reflects the impact of lost patent protection.
Merck now forecasts full-year 2013 adjusted EPS in a range of $3.48 to $3.52, which is higher than the current consensus estimate of $3.47. Through the first three-quarters of 2013, Merck’s EPS totaled $2.61, which implies that fourth-quarter EPS will fall in the range of $0.87 to $0.91. The consensus fourth-quarter EPS estimate is $0.90.
The company’s CEO said:
We are improving productivity and focusing our R&D and commercial resources more precisely to enable our investments in the best opportunities for innovation and growth. We are encouraged that our combination hepatitis C regimen has joined our anti-PD-1 immunotherapy in being designated as a ‘breakthrough therapy’ by the FDA.
The August 2012 loss of patent protection on the company’s Singulair asthma and allergy drug continues to hit Merck’s revenue hard. A year ago, Singulair accounted for $602 million in sales, compared with just $280 million in the third quarter of this year. Pharmaceutical sales overall were down 4% (2% excluding currency translation effects), or about $400 million.
Shares of Merck stock were trading about 0.8% higher in Monday’s premarket, at $47.03 in a 52-week range of $40.02 to $50.12. Thomson Reuters had a consensus analyst price target of around $51.05 before this report.
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