February 7, 2007

Merck announced good sales growth for the last quarter of 2006 but noted a major drop in earnings due to special charges and an increase in reserves for future legal costs.

The company's fourth quarter earnings hit 22 cents per share, or $474 million, Merck said Jan. 30. In the fourth quarter of 2005, earnings were 51 cents per share, or $1.12 billion. When Merck adjusted for special costs, however, earnings for the fourth quarter of 2006 reached 50 cents per share.

Expenses from Merck's $1.1 billion acquisition of Sirna Technologies in November lowered the earnings, the company said. Other deals led to higher than anticipated R&D spending, which reached $1.7 billion in the fourth quarter, an increase of 55 percent from fourth quarter 2005, the company said. In the fourth quarter of 2006, Merck closed 29 deals, including the acquisition of Sirna and a vaccine collaboration with Idera Pharmaceuticals.

In addition, the company increased its legal reserves to $858 million for Vioxx litigation, Merck said. As of Dec. 31, 2006, approximately 27,400 Vioxx lawsuits were pending, according to the company.

The company also established a reserve of $48 million for future legal defense of Fosamax. As of Dec. 31, 2006, 104 Fosamax-related cases had been filed against Merck, the company said, adding it does not expect any trials until 2008. The suits claim that osteoporosis drug Fosamax causes osteonecrosis of the jaw.