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Biotech / Medical : Merck -- Ignore unavailable to you. Want to Upgrade?

To: Epicenter who wrote (1113)	12/10/1998 10:56:00 PM
From: Anthony Wong	Read Replies (4) \| Respond to of 1580

Epicenter and thread, here's Will's report of the analyst meeting at labpuppy.com, and it contains some information not otherwise reported by the news media. 12/10/98 Well, Merck (MRK) "pooped" instead of "popping" at their analysts' meeting. The company guided analysts 1999 earnings estimates down from around $4.97 to $4.85-$4.95. This caused the stock to drop over $6 yesterday and over $5 today. While the company did not state the reason for the fall in earnings, I would assume it is due to an increase in 1999 marketing costs to launch Vioxx, its arthritis drug. In addition, I assume it is due to a decline in marketing for their drugs going off patent over the next few years (which have much higher profitability than new drugs). Here is my take on the meeting: Negative news: First and most important, the lowering of their guidance for 1999 earnings. While they would not get much specific details regarding their Medco (their PBM business and a large portion of their revenue) operations, it appears that it is continuing to slow. While this fact is well known, the company faces patent expirations on products (such as Vasotec, Mevacor and Pepcid) that account for roughly 23% of their revenue (and even more of their profits). These products start to go off patent in the year 2000 and will cause the company's growth to slow for a couple of years. The company is hoping that recently introduced products such as Singular, Propecia, Maxalt, Aggrastat and Cosopt (as well as the launch of Vioxx in 1999) will offset this decline in sales. However, other than Singular, the other products have not taken off. Vioxx does not look like it will get a significantly better safety label than Celebrex (Monsanto's competing product). Positive news: Vioxx will be a huge product. My guess is peak sales of $2.0 billion. It looks as if Vioxx will have a better marketing message than Celebrex given that Vioxx will probably be approved for pain (although both products should do well). Zocor's (cholesterol lowering) market share seems to be stabilizing. MK-869 (substance P) for depression. This could be a blockbuster drug ($1.0+ billion in peak sales) and it is expected to be on the market around 2002. The company will be receiving between $0.7-$1.0 billion this year due to the Astra merger with Zeneca (and will receive up to $5 billion in the future). This cash influx should help EPS by funding shares repurchases. Merck would not be my top pick in the pharmaceutical sector. An interesting note from the meeting, Merck mentioned that they might combine Singular (their asthma drug) with Schering Plough's (SGP) Claritin (an allergy drug) to form an asthma/allergy drug. This is either good news or potentially bad news – it depends if Merck uses the generic version of Claritin when it goes off patent (this would be my guess) or uses one of Claritin's patented versions (although Merck stated that they are not working with SGP). Merck did not give a date when this product might be introduced. Visit Will's site for other pharma news: labpuppy.com