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Strategies & Market Trends : Value Investing

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To: Spekulatius who wrote (19735)	9/30/2004 5:01:48 PM
From: Bob Rudd	Read Replies (1) of 78618

Added PFE doubling prior position at 30.59, similar to ititial cost. I expect 2/3's of $2.5B Vioxx rev will migrate to PFE's Celebrex & Bextras, #1 & 3 Cox-2's. PFE has reaffirmed no evidence of heart risk. This revenue should be highly profitable since it is incremental to in place structure and thus will not be accompanied by normal level of expenses, IMO. Also looked at MRK, but it's multiples are less actractive than PFE's when you factor loss of Zocor in 06 on top of Vioxx. I guesstimate that MRK @33 without Zocor or Vioxx is ~17x PE vs PFE @ 13X 05 without factoring additional eps from Vioxx refugees. And that ignores the gorilla in the room for MRK: Litigation risk. There was a good article on Forbes.com today, "MERCK'S LEGAL NIGHTMARE" comparing it to Wyeth's Phen-Fen nightmare - WYE has taken $16-17B in charges on that, and it's far from over. The chief lizard from Milberg-Wiess was on CNBC licking his chops over the shareholder class action possiblilities - they have one in place over Vioxx and it just got a big boost. No one can reliably estimate the litigation risk with MRK, so I'm unlikely to touch it for a value position, though I might trade it for a dollar or two on a bounce.

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