Merck & Co. Inc.MRK

Morningstar Rating

Stock Research and Analysis

by Damien Conover, CFA

Facing increased competition, patent losses, and a pipeline of late-stage drugs with poor chances of approval, Merck greatly improved its long-term outlook by acquiring Schering-Plough. Without Schering, Merck's prospects were muddled--despite its recent Read more

Bulls Say

New product launches of Gardasil and Januvia leaped to a strong start, and delays of competing drugs still in development should give Merck a leg up in establishing market leadership.

Restructuring efforts should reduce costs and improve margins over the long term, helping to offset the patent expirations of high-margin products.

The acquisition of Schering enables Merck to potentially achieve $3.5 billion in annual cost-saving synergies by 2012.

Merck's recently introduced bottom-up sales and marketing approach gives the salesforce autonomy to tailor sales calls and should better service doctors and reduce operating costs.

The acquisition of Schering brings in a set of potential blockbuster new pipeline drugs, including cardiovascular drug TRA and rheumatoid arthritis drug golimumab. Read more

Bears Say

Merck faces the loss of its next two largest sales contributors over the next five years: Cozaar/Hyzaar in 2010 and Singulair in 2012.

New product launches carry significant risk in terms of market acceptance, and they might reach saturation faster than expected.

Poor results from the Enhance study combined with increased generic statin competition could reduce the market potential for Vytorin and Zetia.

Based on a change-of-control clause between Johnson & Johnson JNJ and Schering, Merck may need to renegotiate the sales partnership for arthritis drugs Remicade and golimumab with Johnson & Johnson at less favorable terms.

The combining of Schering's and Merck's operations will probably encounter several integration problems, which may delay and possibly negate some of the high-cost synergies expected by the market. Read more

Strategy

Merck has become increasingly interested in pursuing external alliances and in-licensing products from other firms to complement its internal research and development capabilities. Within the company's Read more

Management

Richard Clark took the helm as CEO in May 2005 and was elected chairman of the board in December 2006. Clark joined Merck in 1972 and has held various positions at the company including president of Merck's manufacturing division and senior posts at Read more

Profile

Merck makes pharmaceutical products to treat conditions in a number of therapeutic areas, including cardiovascular disease, asthma, infections, and osteoporosis. The company Read more

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