With big drug maker Merck's (NYSE:MRK) news that it would discontinue developing its phase 3 depression drug MK-0869, what now? The stock hardly budged and today it is actually inching up slightly from yesterday's $44.25 close.

With its August spinoff of low-profit pharmacy benefit manager Medco Health Solutions (NYSE:MHS) complete, the company announced on Oct. 22 that it would cut 4,400 jobs and reduce costs. Shares dropped 7%. But today may be different because savvy investors know that for a company not relying on only one major drug in its pipeline, cutting a late-stage candidate means more money for other hungry research and development programs. Think baby birds when a parent returns to the nest from shopping.

But unlike peers Pfizer (NYSE:PFE) or Johnson & Johnson (NYSE:JNJ), Merck doesn't exactly have the richest pipeline, which it needs to backfill its current over-$5-billion-a-year seller Zocor (cholesterol), as well as Vioxx (rheumatoid arthritis), Cozaar and Hyzaar (high blood pressure plus other indications), Fosamax (osteoporosis), and Singulair (asthma). Newer drugs -- Zetia (cholesterol) and Emend (chemotherapy side effects), as well as antifungal Cancidas and Arcoxia (multiple indications) -- aren't yet in their sales league.

And Merck pulled or put on hold at least three development programs this year in addition to the latest -- a phase 2 anxiety drug in February, a phase 2 asthma drug in April, and a phase 1 HIV treatment in Q2. Unlike some other companies, Merck apparently doesn't maintain a clear depiction of its pipeline on its website nor in its SEC filings, so it's tough to say exactly what's on deck. But with Vioxx on its way out of patent protection and Zocor the only billion-dollar seller, it better be good.

A particular beef is that the company's authorized $10 billion in share buybacks. Merck's debt may be cheap, but with debt twice cash, it seems a waste of money to buy back any shares. Wait a minute. That's based on prior figures when the company still owned Medco. The Q3 earnings press release says not one word about cash and debt. We don't like it.

On the other hand, Merck hopes to boost its pipeline through its 99% share of Banyu Pharmaceuticals, Japan's 11th largest drug maker. Taking any potential there and looking at Merck shares that currently sell for about 15 times the company's estimated 2003 EPS of $2.90-$2.95, Fool Community member admiraltroll thinks the shares are undervalued. He shares his insightful and detailed analysis on the Foolish Collective discussion board. Don't miss it!