By Ransdell Pierson
(Reuters) - Merck & Co Inc (N:MRK) issued cautious 2016 revenue and earnings forecasts after disappointing fourth-quarter demand for its Januvia diabetes treatment and its Remicade arthritis drug.
Sales of Januvia and a related drug called Janumet, the company's biggest franchise, fell 12 percent to $1.45 billion. Merck said their tumble was due in large part to timing of customer purchases in the third quarter. Competition from a growing number of other oral diabetes treatments also hurt sales.
Remicade, which is facing competition outside the United States from cheaper generics, suffered a 29 percent sales decline to $396 million.
Shares of Merck fell 1.5 percent to $49.65 in premarket trading.
Merck is counting on Keytruda, a recently approved immuno-oncology treatment for melanoma and lung cancer, to boost its earnings for years to come. The medicine, which takes the brakes off the immune system, is competing with Bristol-Myers Squibb Co's (N:BMY) similar Opdivo treatment, which is picking up sales faster.
Keytruda sales rose to $214 million in the fourth quarter, about half Opdivo's $475 million in revenue in that period.
"Our initial read on the earnings and guidance reaffirms our neutral stance on (Merck) as pressure on key products such as Januvia and Remicade will likely limit near-term (earnings) growth," Credit Suisse (VX:CSGN) analyst Vamil Divan said in a research note.
Merck, the second-biggest U.S. drugmaker behind Pfizer Inc (N:PFE), forecast full-year earnings of $3.60 to $3.75 per share, excluding special items. The analysts' average estimate was $3.72, according to Thomson Reuters I/B/E/S. Merck said it expected 2016 revenue of $38.7 billion to $40.2 billion. Wall Street had forecast $40.25 billion. Fourth-quarter revenue fell 3 percent to $10.22 billion, below analysts' expectations of $10.35 billion. Sales would have risen 4 percent if not for the stronger dollar, Merck said.
Net income attributable to the company fell to $976 million from $7.32 billion. Excluding acquisition-related costs and other special items, the company earned 93 cents per share, topping Wall Street forecasts of 91 cents. Sanford Bernstein analyst Tim Anderson attributed the earnings beat largely to a lower tax rate.
Also grappling with the stronger dollar, Pfizer on Tuesday forecast 2016 revenue and earnings below analysts' estimates.