Novice Investing - Merck Going Strong Without Painkiller

Date: Sunday 20th 2008f July 2008 12:37:04 PM

Merck Going Strong Without Painkiller - 01/31/2006

By: Novice Investing Staff

Merck Co & Inc. (MRK) reported better than expected earning on Tuesday, 31st January 2006. For the 4th quarter of 2005, it earned 64 cents excluding certain items, compared to 62 cents estimate. Meanwhile, the company also boosts its legal reserve cost by $ 295 Million related to its painkiller drug, Vioxx.

Sometimes a drug company can manipulate earnings by temporarily spend less on Research & Development. This does not seem to be the case for Merck as R & D expense held steady at $ 1.1 Billion.

A lot of analysts point out to the near-expiration of Merck's blockbuster drug, Zocor. But we believe that it should be a no-issue. For the quarter, sales of Zocor is down 18% to $ 1.1 Billion. This is a drop of $ 200 Million. However, Merck had been co-developing two newer cholesterol drugs, Zetia and Vytorin with Schering Plough for quite some time now. Sales for these two drugs are at $ 355 Million now. Merck also reportedly is developing of new cholesterol treatment drugs to increase HDL level, instead of lowering LDL level. While this drug is not in the market yet, that will be sufficient to replace Zocor revenue for the foreseeable future and then some.

For 2007 and beyond, Merck too has several vaccines for different treatments that have the potential to be a billion dollar revenue producer. Thus, while Zocor's patent expiration is not welcomed, we believe that Merck can replace the lost revenue with other means. In particular, we are hopeful to the potential of Vytorin and Gardasil.

For now, Merck shareholders should experience a slight decrease of earnings due to Zocor's patent expiration. But, the future of Merck still looks bright despite the Vioxx setback. At this point, the number of Vioxx's lawsuit seems to stabilize at less than 10,000 cases recently.

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Merck Co & Inc. (MRK) or any other securities.

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