Merck & Co Registers 15% Growth in Consolidated Sales During FY 2009

U.S. pharma major Merck & Co has reported financial figures for the fourth-quarter and full-year period ending 31 December 2009 indicating a robust rise in its topline, with total sales up by 67% and 15% in the respective periods under review. The results are the first for the combined unit following the acquisition of and merger with Schering-Plough (U.S.) initiated last year. Given the impact of the merger—which includes a US$7.5-billion pre-tax gain, merger-related expenses, and restructuring costs—the data may not compare with the stand-alone Merck's results from last year. In terms of expenditure, as expected, higher cost of sales, marketing and administration, and research and development (R&D) expenses were reported, as Schering-Plough's operations are also included. The fourth quarter included US$2.3 billion of additional costs related to purchase-accounting adjustments. Costs associated with restructuring programmes for that period stood at US$19 million.

Operating income, however, displayed the pressures of the cost structure by reporting falls of 82% and 33.9% for the fourth-quarter and full-year periods. Net income, however, reflected the positives of the merger, with a more than 100% rise in the fourth quarter, and 64% in the full-year period.

The restructuring also indicated some changes in the company's categorisation of products. As evident from the table below, the firm has included legacy brands from Schering-Plough that have boosted product sales. Also, the firm has now categorised those products going off-patent under "Mature Brands". The blockbuster brands are Singulair, Cozaar, Gardasil, ProQuad, Fosamax, and Januvia

Restructuring Programme

The firm announced the start of the first phase of a new global merger restructuring programme. Merck is to reduce its total workforce by 15% across all areas globally, from its current employee count of 100,000. The first phase will see 2,500 vacant positions being eliminated from the sales, and administrative sectors, with consolidation of certain manufacturing and research facilities. The phase is expected to be completed by the end of 2012 with pre-tax costs estimated at US$2.6–3.3 billion.

Outlook and Implications