Merck Swings to Loss as Cyberattack Hurts Sales -- Update

By Austen Hufford and Peter Loftus Features Dow Jones Newswires

Merck & Co. said a cyberattack over the summer caused temporary production shutdowns and cut sales by at least $135 million in the third quarter, highlighting the very-real impacts virtual attacks can have on company results.

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The June attack disrupted Merck's world-wide operations, including manufacturing, research and sales. In addition to the lost sales, Merck's efforts to fix the damage added $175 million in costs for the third quarter, Finance Chief Robert Davis said on a conference call with analysts. Merck expects a similar impact to revenue and expenses for the fourth quarter.

The cyberattack on major companies around the globe in late June, dubbed Petya by computer-security experts, locked digital files and demanded payment for them to be returned at more than 100 companies and institutions.

Merck Chief Executive Kenneth Frazier on Friday called it "an isolated but meaningful cyber incident."

Another Petya-related hit to Merck sales: the company said it borrowed doses of its Gardasil 9 vaccine from a U.S. Centers for Disease Control and Prevention pediatric vaccine stockpile to fulfill customer orders, because the cyberattack caused a temporary production shutdown, and there was higher-than-expected demand. That cut third-quarter sales by $240 million, but Merck will recognize that revenue as it replenishes the stockpile, expected in 2018.

Gardasil 9 protects against the human papillomavirus, or HPV, which can cause cervical cancer and other types of cancer. The CDC recommends routine HPV vaccination of adolescents.

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The CDC maintains a pediatric vaccine stockpile to offset supply challenges, according to its website. A CDC spokesperson couldn't immediately be reached for comment.

Overall, sales fell 2% to $10.33 billion. Still, the company saw big results from its Keytruda cancer drug, which got an important Food and Drug Administration approval in May. Sales of the drug increased to $1.05 billion from $356 million.

The company posted a loss of $56 million, or 2 cents a share, compared with a profit of $2.18 billion, or 78 cents a share, in the same quarter last year. On an adjusted basis, excluding certain items, earnings per share rose to $1.11 from $1.07.

Analysts polled by Thomson Reuters had expected revenue of $10.54 billion and adjusted earnings per share of $1.03.

Shares fell 4.7% to $59.06 in late-morning trading Friday.

Write to Austen Hufford at austen.hufford@wsj.com and Peter Loftus at peter.loftus@wsj.com

(END) Dow Jones Newswires

October 27, 2017 12:30 ET (16:30 GMT)