Merck falls as analyst forecasts weaker profits

Shares of Merck & Co. declined Monday after a UBS analyst downgraded the drug maker, saying sales of its HPV treatment Gardasil may disappoint, and shortages of other vaccines will limit Merck's profit.

Roopesh Patel downgraded the stock to "Neutral" from "Buy," and trimmed his price target to $40 per share from $43. He said data from IMS Health shows sales of Gardasil slowed to about $300 million in the second quarter _ about $50 million less than he said Wall Street expects. At the same time, manufacturing issues at the company's vaccine plant cut into supplies of four products and hurt sales.

Patel said it is very unlikely Merck can surpass Wall Street's expectations this year because of those problems, along with weaker sales of the cholesterol drugs Vytorin and Zetia, a delay in approval of Gardasil in adult women, and the Food and Drug Administration's rejection of its cholesterol drug candidate Cordaptive.

Merck sells Vytorin and Zetia through a joint venture with Schering-Plough Corp. Earlier this year, a clinical study showed the drug was no more effective than generic drug versions of an older drug, Zocor, at preventing the buildup of plaque.

The FDA ordered Merck to fix a number of problems at its main vaccine plant in May, as the agency objected to conditions at the West Point, N.Y., facility. Combined, Patel thinks the "setbacks" will cost Merck between 24 cents and 26 cents per share in 2008.

In afternoon trading, the stock lost $2, or 5.2 percent, to $36.45.

The analyst thinks Merck will meet analyst estimates this year, but fall short each year through 2012 as key drugs lose patent protection.

A Merck spokeswoman said the company will discuss sales of its products when the company makes it second-quarter report on July 21. The Whitehouse Station, N.J., company expects $1.9 billion to $2.1 billion in Gardasil revenue in 2008.

In April, Merck said weaker sales of Vytorin and Zetia would take away $700 million in net income from the joint venture.

Merck shares closed down $1.85, or 4.8 percent, at $36.60.