Merck Message Board - Msg: 25231692

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Biotech / Medical : Merck

MRK 100.26

-0.1%

Dec 15 3:59 PM EST

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From: mopgcw	12/5/2008 8:10:40 PM
	of 1580

CS: We have incorporated information from this morning's conference call related to Merck's financial guidance, as well as our conversation with the company, into our Merck model. The full report highlight the changes that we have made to our MRK model. Most notably, our 2008 EPS estimate is unchanged at $3.28 but our 2009 estimate decreases from $3.67 to $3.21. • We maintain our Neutral rating on MRK shares but reduce our 12-month target price (which is a 50/50 blend of DCF and relative valuation) from $34 to $30. Our best ability to fully assess the company's valuation, however, will come after next Tuesday's (2nd December) Business Briefing. It is unlikely that incremental information on the current pipeline will be sufficient for the company to overcome the hurdles it now faces. We believe that the company will need to do a significant acquisition in order to effectively augment their future growth. • The main drivers of our model changes were in Merck's vaccine business where we have significantly reduced our Garadsil estimates, especially Internationally. We also added further conservatism to our estimates for other important vaccines (e.g. ProQuad, Zostavax) given some uncertain comments the company made. Based on the manufacturing and/or competitive challenges these vaccines face, the timing and magnitude of the opportunity they present is not entirely clear. • Downward adjustments to future gross margin and interest income estimates and adjustments for the impact of foreign exchange led to further reductions in our earnings estimates.

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