Merck shares slide after earnings decline

Merck shares were down slightly in early morning trade after the drugmaker's third-quarter net income fell due to substantial costs linked to recent acquisitions and divestitures.

Shares of MRK are down 2.3% to $56.29 in afternoon trading.

Even then, the drugmaker's adjusted earnings on Monday topped Wall Street's view, and it narrowed its full-year adjusted earnings forecast.

Merck also announced that the Food and Drug Administration gave breakthrough therapy designation to Keytruda for advanced non-small cell lung cancer that has progressed on or following platinum-based chemotherapy.

The designation is intended to speed the approval process for drugs that treat diseases that have no or inadequate treatments.

The company earned $895 million, or 31 cents a share, during the July-September quarter. A year earlier it earned $1.12 billion, or 38 cents a share.

"Last October, we launched a multiyear initiative to transform Merck and build a platform for sustained, future growth," said Kenneth C. Frazier, chairman and CEO of Merck, in a statement. "One year later, we delivered solid third-quarter results and are making steady progress in our transformation, including divesting non-core assets, reducing our expense base and investing in our promising new product launches and pipeline."

Increased competition from generic drug makers has hit Merck as well as its rivals in recent years. In response, Merck has focused on ways to bolster its product lineup, including developing treatments in immunotherapy for cancer. Last month, the Food & Drug Administration approved Merck's cancer immunotherapy for the treatment of melanoma, to be sold under the name Keytruda.

Removing costs related to acquisitions, divestitures, restructuring and other items, earnings were 90 cents a share. Analysts surveyed by Zacks Investment Research expected earnings of 88 cents a share.

Revenue declined to $10.56 billion from $11.03 billion partly on divestitures and the termination of a joint venture with AstraZeneca.

Zacks was calling for higher revenue of $10.69 billion.

Pharmaceutical revenue slipped 4% to $9.1 billion on product divestitures and the loss of market exclusivity for some products such as oral chemotherapy drug Temodar and asthma and allergy pill Singulair.

Merck now foresees full-year adjusted earnings in a range of $3.46 to $3.50 a share. Revenue is expected between $42.4 billion and $42.8 billion. The Whitehouse Station, N.J., company's prior guidance was for adjusted earnings in a range of $3.43 to $3.53 a share on revenue between $42.4 billion and $43.2 billion.

Analysts polled by FactSet predict earnings of $3.47 a share on revenue of $42.5 billion.

Keytruda, a genetically engineered drug known chemically as pembrolizumab, is part of a hot, promising new class of antibody-based drugs. They work by taking a brake off the immune system so it can better recognize and attack cancer cells.

In September, the FDA granted accelerated approval to Merck for Keytruda for treating melanoma that has spread or can't be surgically removed in patients previously treated with another melanoma drug called Yervoy.

Contributing: Associated Press