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Earnings Preview: Merck to key on coming new drugs

Linda a. Johnson, AP Business Writer

TRENTON, N.J. (AP) -- Merck & Co., the world's third-biggest drugmaker by revenue, will tout a big surge in the company's pipeline of experimental drugs and a couple of promising new partnerships when it reports first-quarter results before the stock market opens Wednesday.

WHAT TO WATCH FOR: CEO Kenneth Frazier will note the company has five new medicines under review by regulators, another just submitted and four others slated to be submitted for review sometime this year.

In addition, the Food and Drug Administration this month gave Merck's experimental cancer drug lambrolizumab a "breakthrough therapy" designation. That's meant to hasten final testing and the review process.

The drugs currently under regulatory review include insomnia pill suvorexant, ovarian cancer drug vintafolide and sugammadex for reversing effects of anesthesia after surgery. The others are a grass-allergy immunotherapy that gradually reduces allergic reactions and a cholesterol pill combining a generic version of Pfizer Inc.'s former blockbuster Lipitor — the top-selling drug in history — with Zetia, a Merck pill that controls cholesterol in a different way.

Just Monday, Merck and longtime rival Pfizer announced a partnership for further testing and development of Pfizer's experimental Type 2 diabetes pill ertugliflozin. It's about to enter late-stage patient testing. The companies will jointly develop ertugliflozin, to be used on its own and in combinations with two widely used diabetes pills, Merck's Januvia and a generic drug called metformin.

Januvia and combo pills containing it have become Merck's top seller, with about $5.7 billion in sales last year, and the company's been working on expanding that franchise amid the global epidemic of obesity-related Type 2 diabetes.

Analysts may ask about a recent FDA warning that Januvia and numerous other diabetes drugs potentially increase risk of inflammation of the pancreas and precancerous cellular changes in the insulin-making organ.

The FDA is still investigating and recommends patients keep taking the medicines until talking with their doctor. That means Merck, based in Whitehouse Station, N.J., is unlikely to have an update.

Besides the Pfizer partnership, Merck in February closed a deal with South Korea's Samsung Bioepis Co. Ltd. to develop multiple biosimilar medicines — sort-of generic versions of complex biologic drugs produced in living cells.

And this month, Merck & Bristol-Myers Squibb Co. agreed to partner on mid-stage testing of a pill for hepatitis C that combines one drug from each company.

Frazier likely will discuss how well Merck is doing on boosting sales in Brazil, India and other emerging markets. As part of its strategy, Merck this month announced the opening of its new medicine factory in Hangzhou, China. It will package Merck medicines for China and the Asia Pacific region — key targets for growth.

Management also will note it has appointed a new research head, ex-Amgen Inc. R&D chief Roger M. Perlmutter, and that it's taking a charge in the first quarter of $200 million, or 5 cents a share, related to Venezuela's currency devaluation.

WHY IT MATTERS: If all those experimental drugs are approved, they likely would more than make up for revenue lost after two Merck medicines got generic competition last year.

Those are migraine treatment Maxalt and the blockbuster allergy and asthma pill Singulair, which had brought Merck about $5.5 billion in annual sales until its U.S. patent expired in August. Singulair had been the world's 11th-best-selling drug, generating more than 10 percent of company revenue.

Expanding sales in emerging markets also is crucial, but most of Merck's rivals are fighting for a bigger piece of that pie as well.

WHAT'S EXPECTED: Analysts polled by FactSet, on average, expect earnings per share of 80 cents and revenue of $11.11 billion.

LAST YEAR'S QUARTER: Merck reported profit of $1.74 billion, or 56 cents per share, on revenue of $11.73 billion.


Linda A. Johnson can be followed at https://twitter.com/LindaJ_onPharma