If you were lucky enough to time your purchase of Merck (NYSE:MRK) during the heights of the Great Recession, your investment has probably seen a return of 100% or greater. Unfortunately, timing the stock market is practically impossible to do, and as you can see below, long-term shareholders in Merck haven't been rewarded on a nominal basis (not counting dividends) for hanging on to their shares.

MRK data by YCharts

Merck has a couple of key catalysts on the horizon. These include an upcoming decision on breakthrough therapy-designated drug pembrolizumab by the Food and Drug Administration, the advancement of its hepatitis C pipeline, and the potential for what Merck referred to during its conference call as "bolt-on acquisitions" that could really pump up its growth and diversify its pipeline.

Yet, there are a handful of obstacles that loom large for Merck which have the potential to push its stock price lower. Of course, you won't find these negative catalysts from simply gazing over an earnings report. You need to be able to dig deep and uncover the real headwinds that could impede Merck's growth moving forward. Today, we'll take a closer look at three such catalysts.

However, it's wise to mention that the stock market, and the movement of underlying stocks, is the collective opinion of many investors. In other words, the stock market is a two-way street that allows stocks to move both up and down. So, as you read this bearish thesis on Merck keep in mind that just because the company has challenges to face, it doesn't necessarily mean the stock itself will head lower.

A questionable acquisition

First and foremost, I'd suggest that Merck's valuation could take a hit after investors digest the hefty premium that the company paid to acquire Idenix Pharmaceuticals and its pipeline of hepatitis C drug hopefuls.

Source: Nguyen Hung Vu via Flickr.

In June Merck announced its intention to buy Idenix for a whopping $3.85 billion, more than triple the closing value of Idenix in the previous closing session. While other companies have had success buying clinical-stage hepatitis C drugs -- just look at Gilead Sciences' $11 billion purchase of Pharmasset, which yielded the now-blockbuster drug Sovaldi -- Idenix's pipeline has been riddled with disappointments throughout the years.  

In 2010, the FDA placed the lead compounds at the time, IDX184 and IDX320, on clinical hold, which eventually led to IDX320 being scrapped soon after by Idenix, while IDX184 continued on. However, in 2012 IDX184 was once again placed on clinical hold along with IDX19368 because the pathway these two drugs operated by was very similar to the pathway Bristol-Myers Squibb's BMS-986094 functioned in -- and this drug was linked to the death of a patient in midstage studies. Both IDX184 and IDX19368 wound up being shelved as well. And, as icing on the cake, IDX20963, a preclinical therapy that Idenix is trying to get clearance to test in human trials, is also being delayed by the FDA until the company turns over additional preclinical data. 

So, why is Merck buying Idenix? The answer is IDX21437 and IDX21459, the company's nucleotide-based therapies which have demonstrated favorable safety profiles in trials thus far. But, is this really worth $3.85 billion considering the troubles the company's had with its previous pipeline products? I'd venture that the answer might be no.

The premium Merck paid could imply a degree of desperation in seeking growth, but it also might convey the idea that it views its in-house hepatitis C combo, MK-5172 and MK-8742, as inferior to existing and developing products from other companies. Admittedly, the jury is still out on this purchase, but as of now you can call me a huge skeptic of this deal.

Patent woes still very real

The 2009 merger announcement between Merck and Schering-Plough was supposed to be huge for both companies, saving millions in cost synergies and leading to innovation that was expected to help the two push past the impending patent cliff. Instead, Merck has delivered almost nonexistent organic growth over the past decade, and its patent woes don't look as if they'll disappear anytime soon. 

Source: U.S. Food and Drug Administration.

In recent quarters Merck has seen its patent exclusivity lost on blockbuster asthma drug Singulair, which was previously a $5 billion per year drug, and cancer drug Temodar. To add context to these figures, Singulair generated just $284 million in sales in the second quarter of 2014 compared to more than $1.3 billion in the first quarter of 2012, shortly before its patent exclusivity expired.

And it's not going to get any easier. Merck is set to face the loss of its cholesterol-fighting drugs Zetia and Vytorin (a combination of Zetia and Zocor) within the next three years. As my Foolish colleague Dan Carroll notes, Zetia is scheduled to face its first generic competitor in Dec. 2016. Combined, Zetia and Vytorin are on pace to contribute about $4.5 billion in sales this year, or slightly more than 10% of Merck's total sales.

Even if Merck can successfully launch its anti-PD-1 drug pembrolizumab and it finds success in other therapeutic areas, the losses experienced from patent expirations cloud its future growth prospects throughout the remainder of the decade. Total revenue has fallen in each of the past two years and, according to Wall Street estimates, is projected to fall through 2015. But, even then sales aren't expected to jump dramatically. By 2017, the Street still figures Merck's total revenue will fall short of the $44 billion it brought in during 2013.

Do investors really need to bid shares of a company higher that has no genuine organic growth to offer?

A major shift in diabetes treatment?

Finally, the emergence of SGLT2 inhibitors in the second-line diabetes space could mark the beginning of a shift in the way pharmaceutical companies and physicians tackle diabetes. For Merck, which leans heavily on DPP-4 inhibitors Januvia/Janumet, this is potentially bad news.

Patient self-testing their blood glucose level. Source: Alisha Vargas via Flickr.

DPP-4 inhibitors' mechanism of action occurs in the liver and pancreas, and their use tends to be weight-neutral for the patient. But, DPP-4 inhibitors have also been linked with potentially serious side effects, such as pancreatitis and kidney problems.

SGLT2 inhibitors, on the other hand, work on blocking glucose reabsorption in the kidneys, and allow patients to move excess glucose out of their bodies through their urine. Also, SGLT2 inhibitors were shown to have the pleasant side effect of encouraging weight-loss in clinical studies (though make no mistake about it; SGLT2 inhibitors are not labeled for weight loss). This potentially preferable weight-loss profile combined with equally impressive HbA1c reductions as DPP-4 inhibitors makes them a possible replacement and certain competitor in the second-line diabetes treatment space.

For Merck, Januvia/Janumet are its best-selling drugs; they totaled $1.58 billion in revenue in the second quarter, or slightly more than 14% of Merck's total revenue for the quarter. With the company still reeling from the loss of Singulair, and expected to recover just in time to lose exclusivity on Zetia and Vytorin, a potential reduction in sales of its top drugs due to competition could represent the proverbial nail in the coffin for Merck's growth prospects for the remainder of this decade.

Tying things together

It's certainly an exciting period for Merck, with an upcoming decision on would-be blockbuster pembrolizumab, but some very noteworthy headwinds appear set to blow against any upside potential in Merck's stock. Current investors in Merck's stock, and those on the outside who have been thinking about taking the plunge, would definitely be wise to consider both angles on this stock before making their decision to invest.