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Merck & Co. has re-established itself as a premier drug developer, a success that doesn't surprise Barron's, which predicted such as much four years ago and then again in 2005 when the pharmaceutical giant was slammed after the recall of its Vioxx painkiller. Since then, however, Merck has restructured, launching novel products such as its Gardasil cervical cancer vaccine and Januvia oral diabetes medication, which helped it achieve a 47% Q3 profit rise and raise its outlook for a year in which its blockbuster cholesterol drug Zocor went off patent. The company's ability to generate new drugs, analysts say, gives it the power to overcome the shortfalls from patent expirations. Despite a two-fold rise to about $57 since CEO Richard Clark took over two years ago, many believe there's still room for Merck shares to rise, with some predicting that $70 is possible if the company succeeds in delivering on Clark's promise of double-digit earnings growth by 2010.

Sources: Barron's
Commentary: Merck's Earnings Boosted by Strong Vaccine SalesThe Merck Lesson: Watch For Companies On The Ropes
Stocks to watch: MRK. Competitors: PFE, SGP, BMY, SNY. ETFs: PPH, IHE
Earnings call transcript: Merck Q3 2007

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Source: Merck Reinvents Itself - Barron's