It's been a busy week at Merck (NYSE:MRK). On Monday, the drugmaker bolstered its pipeline via an alliance with biotech Neurogen (NASDAQ:NRGN) to develop pain treatments. Then Wednesday, Merck shares got a boost after the company forecast 2004 earnings growth of 5% to 9%.

Today, the company announced yet another alliance. This time the partner is Actelion, a small but profitable Swiss biotech firm. In a collaboration to develop a new class of blood pressure drugs, Merck will pay Actelion $10 million up front, and up to $262 million in milestone payments should the first product reach the market.

With several late-stage failures leaving Merck with a weak pipeline, the company needs these smaller firms to help fix the leak. That said, Actelion got a pretty good deal.

On top of royalties, Actelion will retain worldwide co-promotion rights for any products resulting from the alliance. In addition, Merck will essentially fund Actelion's sales force, which some analysts believe could potentially help transform Actelion into a major player.

As for Merck, the company expects sales of Zocor -- the company's blockbuster cholesterol drug -- to be essentially flat in 2004 at $4.9 billion to $5.1 billion. But with sales of asthma treatment Singulair expected to grow 20% to between $2.4 billion and $2.7 billion, the company expects earnings per share to grow in the range of $3.11 to $3.17.

At $43 a share, Merck's stock trades at less than 14 times 2004 earnings -- far from the premium valuation the company once carried.

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