Merck & Co adjusts yearly forecast amid research operations restructuring

Merck & Co., the second-biggest U.S. drug-maker updated its full-year forecast as the company continues an overhaul of its sales and research operations.

Chief Executive Officer Ken Frazier said he is looking at whether Whitehouse Station, New Jersey-based Merck’s animal health and consumer businesses, as well as its drug projects, might be divested.

“A company is a living, breathing thing, and over time one has to evaluate the opportunities going forward,” Frazier said in an interview today. “The question becomes, are we the right owner of those businesses?”

Merck this month announced it would fire 8,500 workers and shift research and development. The lay-offs add to 7,500 job cuts already announced, amounting to a 20% reduction in Merck’s workforce. The company had about 80,000 employees as of September 30. Drug-makers have been cutting expenses, research programs and positions to focus on creating new medicines, as well as selling or splitting off non-pharmaceutical businesses.

Companys profit for 2013 will be $3.48 to $3.52 a share, Merck said today in a statement. The previous outlook was for $3.45 to $3.55. Third-quarter revenue fell 4% to $11 billion, missing the $11.1 billion estimate of analysts, as Januvia (anti-diabetic drug) sales dropped 5% and foreign currency exchange weighed on results. Net income also dropped to $1.12 billion, or 38 cents a share, from $1.73 billion, or 56 cents, a year earlier, the company said. Earnings, excluding one-time items, were 92 cents a share intact with analysts predictions.

Merck shareholders have been specifically concerned that sales of Januvia will face more competition, said Tony Butler, an analyst with Barclays Plc. Third-quarter sales of Januvia fell to $927 million from a year earlier as around six new treatments that could compete with Januvia may begin selling in the next two years. The medicine has already experienced most of its potential growth, while competitors are cutting prices Butler said. “Both volume and pricing opportunities for Januvia/Janumet are limited going forward,” he said in a note to clients this month.

Under new Research and Development chief Roger Perlmutter, Merck is overhauling its research labs to put more emphasis on vaccines, cancer, diabetes and hospital care. The moves will save $2.5 billion a year by 2015, according to the company.

Mercks shares are down by 2.6% while on a year-to-date basis they advanced more than 10%. The current consensus among 21 polled investment analysts is to hold stock in Merck & Co Inc.