Drug company R&D days are a good time to see if a company is worth the investment. Because they give a good look at the company's future, the meetings tend to paint a better long-term picture of the company than earnings releases. That is, as long as you can plow through the PR chaff to find the company grain.

For Merck (NYSE: MRK) there's the added issue of figuring out whether the integration of Schering-Plough is going smoothly. Management pointed out that eight of the company's top 10 drugs grew through the integration period, but that seems a little misleading. The real question is how much the drugs would have grown had sales reps not been distracted by the potential of losing their job.

Investors can't answer that, and it may be years before we know how well the integration went. So far though, Merck seems to be handling the integration well enough with a 7% increase in revenue during the first quarter, assuming the merger had happened at the beginning of 2009 instead of near the end.

Livers, bones and hearts
I liked the Merck-Schering-Plough combination better than the Pfizer (NYSE: PFE)-Wyeth one mostly because Schering-Plough came with such a strong pipeline. Merck wasn't afraid to flaunt it yesterday.

The biggest potential near-term revenue driver for Merck is its hepatitis C treatment boceprevir. How much of a driver will depend on how the phase 3 data for boceprevir and rival telaprevir from Vertex Pharmaceuticals (Nasdaq: VRTX) turn out later this year. Based on the phase 2 data, it's likely that they'll both make it onto the market, so sales will be based on the cure rates of the drugs and their side effect profiles.

Merck lost exclusivity for Fosamax recently, but it might have a replacement osteoporosis drug in odanacatib. Competing against generics as well as new drugs like Amgen's (Nasdaq: AMGN) Prolia, will be tough. Fortunately the osteoporosis market is huge -- and getting larger thanks to the baby boomers -- so grabbing even a small chunk of the market will result in meaningful sales.

Merck has always been a powerhouse in the cardiovascular arena and Schering-Plough had a nice selection too -- they were partners on cholesterol drugs Vytorin and Zetia -- so it's not too surprising that's where its pipeline is the fullest. The biggest potential blockbuster of the group is its blood-clot reducer, vorapaxar. Merck hopes the novel molecule will have the perfect balance of reducing heart attacks while not increasing the risk of bleeding.

Grabbing even a piece of the multibillion-dollar market owned by Bristol-Myers Squibb (NYSE: BMY) and sanofi-aventis' Plavix would be great, but as Eli Lilly's (NYSE: LLY) Effient has shown, that isn't particularly easy. Effient works better than Plavix, but its side effect profile seems to have doctors uninterested at this point -- sales of Effient totaled just $8.8 million in the first quarter.

When regulators strike back
Ultimately Merck is as dependent on regulators approving its drugs as any other drugmaker. Its larger size means one failure won't kill the company, but the company still needs plenty of hits to move the revenue needle.

For instance, one of its cardiovascular drugs, Tredaptive got sent back to the drawing board by the Food and Drug Administration in 2008. The drug raises good cholesterol levels without the hot flashes associated with Abbott Labs' (NYSE: ABT) Niaspan, but Merck won't be able to apply for approval until a cardiovascular study is complete in 2012.

Merck's first attempt at a follow-on biologic didn't even make it that far. Merck said yesterday that it's killing development of MK-2578, a pegylated form of anti-anemia treatment erythropoietin, which Merck hoped would improve on Amgen's erythropoietin, Aranesp. The FDA wants a cardiovascular study, which would take enough time and money that Merck decided it wasn't worth developing the drug.

So is it a buy or not?
In the short term, Merck doesn't look all that appealing. The company is priced at 10 times the middle of this year's adjusted earnings guidance, which isn't exactly a steal. And you still have the uncertainty of integration issues. On the other hand, you'll get a fat 4.5% dividend yield, which should help solidify the price.

In the longer term, though, Merck's pipeline looks strong. Like any drugmaker, there's plenty of risk of failure, but with so many potential winners, the risk-reward ratio looks good enough to justify holding for the long term.

Pfizer is a Motley Fool Inside Value pick. Vertex Pharmaceuticals is a Rule Breakers recommendation. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool has a disclosure policy.