NEW YORK (Reuters) - Tight cost controls helped Merck & Co <MRK.N> and Swiss drugmaker Novartis AG <NOVN.VX> to better-than-expected quarterly earnings on Monday, while high expenses contributed to disappointing results from Eli Lilly and Co <LLY.N>.
By Bill Berkrot
NEW YORK (Reuters) - Tight cost controls helped Merck & Co <MRK.N> and Swiss drugmaker Novartis AG <NOVN.VX> to better-than-expected quarterly earnings on Monday, while high expenses contributed to disappointing results from Eli Lilly and Co <LLY.N>.
Lilly was also hit by disappointing sales of its Byetta diabetes drug, while Novartis and Merck, like much of the industry, are dealing with patent expirations and generic competition for some of their important medicines.
Novartis benefited from the weak dollar as well as its cost-cutting program in posting a net profit of $2.13 billion that easily surpassed analyst forecasts of $1.83 billion.
!ADVERTISEMENT!Merck earned $3.3 billion, or $1.52 per share, up from $1.7 billion, or 78 cents per share, a year earlier. Excluding items, Merck earned 89 cents per share, topping analysts' average forecast by 3 cents, according to Reuters Estimates.
Bear Stearns analyst John Boris said Merck's cost of goods sold was $109 million less than he had expected and taxes were $314 million less, helping to offset revenue weakness.
Merck was hit by plunging sales of its Fosamax osteoporosis drug, now facing generic competition; slowing sales growth of cholesterol drugs it shares with Schering-Plough Corp <SGP.N>; and lower-than-expected sales of its Gardasil vaccine to prevent the virus that causes cervical cancer.
Lilly earned $1.06 billion, or 97 cents a share, for the quarter compared with $508.7 million, or 47 cents per share, a year before. Excluding special items, Lilly earned 92 cents, missing Wall Street expectations by 4 cents.
It did see solid sales growth in its antidepressant Cymbalta, insulin drugs Humalog and Humulin, and the impotence treatment Cialis.
"Lilly missed because its sales, general and administrative expenses were higher than expected, and we didn't get the expected amount of growth from Byetta," said Edward Jones analyst Linda Bannister.
Dresdner Kleinwort analysts cited Novartis' better-than-expected cost containment, especially in cost of goods sold, as a key factor in mitigating the loss of blood pressure medicine Lotrel, which is facing generic competition, and the bowel drug Zelnorm, which was pulled from the U.S. market over safety concerns.
Both Merck and Lilly reaffirmed their full-year earnings per share forecasts, excluding items. Lilly sees $3.85 to $4, reflecting growth of as much as 13 percent, while Merck expects to earn $3.28 to $3.38, or growth of no more than 6 percent.
Pharmaceutical shares have been hit hard this year, and midway through first-quarter earnings reporting season there appears to be little reason for investors to jump back in, as good news seems to be driven by cost-cutting and foreign exchange benefits, rather than fundamentals.
It was largely the weak dollar that was responsible for the better-than-expected first quarter Johnson & Johnson <JNJ.N> reported last week.
Pfizer last week reported a worse-than-expected drop in quarterly profit, due largely to high operating expenses that were only partially offset by aggressive cost-cutting.
Novartis shares closed up 3 percent in Switzerland. Merck was off 8 cents to $39.68 on the New York Stock Exchange, while Lilly shares were down $2.32, or 4.5 percent, to $49.75, also on the NYSE.
(Reporting by Ransdell Pierson, Lewis Krauskopf and Bill Berkrot in New York, with additional reporting by Sam Cage in Zurich; editing by Gerald E. McCormick)
