Will Merck Keep Defying Skeptics in 2013?

As December comes to a close, 2013 is just around the corner, and it's a good time to look at the future prospects for the stocks you own. If you don't know where a company's headed in the next year and beyond, then it's impossible to make an informed decision about whether you should add the stock to your portfolio -- or sell it if you already own it.

Today, I'll look at Merck (NYSE: MRK  ) . This company has been a member of the Dow Jones Industrials (DJINDICES: ^DJI  ) since 1979, but even though Merck did a great job dealing with some serious patent cliff issues in 2012, some investors are worried about the drug giant's ability to keep moving higher in the coming year. Read on for more about Merck's prospects for 2013.

Stats on Merck

Average Stock Target Price

$47.79

Full-Year 2012 EPS Estimate

$3.80

Full-Year 2013 EPS Estimate

$3.68

Full-Year 2012 Sales Growth Estimate

(2.2%)

Full-Year 2013 Sales Growth Estimate

(2.9%)

Forward P/E

11.2

Source: Yahoo! Finance.

Can Merck's stock defy its falling revenue and earnings?
Perhaps the most obvious sign of Merck's dilemma is in analysts' projections for the coming year. Even though expectations are for declines in both sales and earnings per share, the target price for the stock implies a further 15% rise from current levels.

It's not that Merck doesn't have some great prospects in its pipeline. The company's Vintafolide ovarian cancer treatment is in phase 3 trials, and it's looking to provide a better alternative to rival drugs Gemzar from Eli Lilly (NYSE: LLY  ) and Taxol from Bristol-Myers Squibb (NYSE: BMY  ) . Osteoporosis drug odanacatib and human-papillomavirus fighter V503 also have a lot of potential to become billion-dollar blockbusters if they can gain approval.

But running clinical studies and trying to gain approval is always a dicey proposition. For instance, Merck's Tredaptive cholesterol treatment failed to show significant reductions in coronary death, non-fatal heart attacks, or strokes, and the company therefore said it wouldn't seek FDA approval for the drug.

Moreover, the company is continuing to see drugs go off the patent cliff. This year, Merck will lose protection on Temodar and Maxalt, opening the door for Teva Pharmaceutical (NYSE: TEVA  ) finally to start producing the generic version of brain-cancer fighter Temodar that it sought to release in the past.

An interesting issue for Merck awaits a decision from the Supreme Court, which will rule on whether pay-for-delay agreements with generic producers like Teva are anti-competitive. With Merck facing potential liability for having made such an agreement, a favorable decision could help it avoid a touchy subject.

Merck faces plenty of challenges in 2013, but it has shown its ability to get through similar ones before. With a good pipeline, Merck has a strong chance of giving shareholders a profitable 2013.

Learn more
If you're looking at Merck as a potential investment, you really owe it to yourself to get the most in-depth information on the stock you can find. Go beyond this brief article and read our premium report on the stock, in which senior biotech analyst Brian Orelli, Ph.D., gives you his opinion on whether Merck is a buy right now. Don't wait; claim your copy now by clicking here.

Click here to add Merck to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 2172524, ~/Articles/ArticleHandler.aspx, 4/19/2014 6:09:55 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

TREND TRACKER: Get Rich When the Web Goes Dark

It's time to say "goodbye" to your Internet! One bleeding-edge technology is about to put the World Wide Web to bed. And if you act right away, it could make you wildly rich. Experts are calling it the single largest business opportunity in the history of capitalism… The Economist is calling it "transformative"... but you'll probably just call it "how I made my millions." Big money is already on the move. Don't be too late to the party – find out the 1 stock to own when the Web goes dark.


Advertisement