(Corrects Gardasil market share in 13th paragraph.)

Dec. 4 (Bloomberg) -- Merck & Co. said 2009 profit may decline amid falling sales of its Zetia and Vytorin cholesterol pills and weak international revenue. The forecast missed analysts’ estimates, dropping shares 5.5 percent.

Profit excluding one-time items will be $3.15 to $3.30 a share next year, Whitehouse Station, New Jersey-based Merck said today in a statement. The median estimate of 17 analysts in a Bloomberg survey was $3.52 a share. Merck is the first big U.S. drugmaker to forecast 2009 profit.

The company said in October it would cut 7,200 jobs and close plants in 2009 as it braces for generic competition to $8 billion in products within five years. Vytorin and Zetia sales have been stung by studies saying they were no better at unclogging arteries than a generic pill and may boost cancer risk. Meanwhile, overseas sales are expected to drop as the dollar rises against foreign currencies, the company said.

“Between foreign exchange and several struggling franchises, the company does face significant headwinds in ‘09 and possibly beyond,” said Tim Anderson, an analyst with Sanford C. Bernstein & Co. in New York in a report today. “This guidance will likely be viewed as disappointing, yet not terribly surprising given what is happening with both Merck and with drug industry trends at large.”

Merck sank $1.46 cents, or 5.5 percent, to $25 at 4:15 p.m. in New York Stock Exchange composite trading. The company has lost 57 percent of its value this year.

Gaining Dollar

The strengthening U.S. dollar will reduce earnings by 6 percent in 2009, compared with a 3 percent benefit this year, the company said. About 45 percent of Merck’s sales are outside the U.S. and half of that is in Euros.

The Euro has lost 13.4 percent of its value against the dollar this year. That means Merck makes fewer dollars for each product it sells in Europe. The Euro is estimated to decline against the dollar throughout 2009, according to data complied by Bloomberg.

Merck made no change in its forecast for 2008 earnings of $3.28 to $3.32 a share, when one-time costs are excluded.

“We are in the midst of an extraordinary time for the business world and the company. There are uncertainties in all markets and the pharmaceutical market is no exception,” said Merck Chief Executive Officer Richard T. Clark in a conference call with analysts. Prescription volume dropped in the second half of the year, he said.

Merck will meet with analysts and investors Dec. 9 to discuss its business in more detail.

Cholesterol, Vaccines

Sales of Vytorin and Zetia, which Merck shares with Schering-Plough Corp., appear to have stabilized, though insurance coverage for the medicine has worsened, said Clark. Doctors, patients, and insurers have been shunning the product since a January study called Enhance showed the medicine may work no better unclogging arteries than a cheaper, older pill. A separate study found the drugs may increase the risk of cancer, though another analysis contradicted that.

The company expects sales of the cervical cancer vaccine Gardasil to be little changed in 2009 at $1.4 billion to $1.6 billion. Gardasil won U.S. approval in 2006 to protect girls and women ages 9 to 26 against the sexually transmitted human papillomavirus, which can cause cervical cancer.

Sales of the vaccine dropped 4 percent in the third quarter as demand declined in the U.S. among school-age girls. Sales to young women were less than the company expected. GlaxoSmithKline Plc’s similar vaccine Cervarix could become available in the U.S. next year. In markets where both Glaxo and Merck’s vaccine are available, Merck said it has won seven out of 10 government contracts, which represent 51 percent of the eligible population in those countries.

Merck is seeking U.S. clearance to expand use of Gardasil to women as old as 45.

Other Vaccines

Revenue from other vaccines will increase to $2.8 billion to $3.1 billion, compared with an estimated $2.6 billion to $2.8 billion in 2008, Merck said.

One of Merck’s fastest-growing products next year will be the diabetes pill Januvia, the first in a new class of diabetes drugs that boosts the body’s own mechanism for producing insulin, the company said. Sales of Januvia will increase to between $2.4 billion and $2.7 billion next year, Merck said.

Merck expects sales of its top-selling asthma treatment Singulair to increase as much as 9.3 percent to between $4.4 billion and $4.7 billion.

To contact the reporter on this story: Shannon Pettypiece in New York at spettypiece@bloomberg.net

Last Updated: December 5, 2008 14:19 EST