If you're going to invest in Merck's
In contrast to Pfizer
I like it.
Drugmakers can't grow without bringing new drugs on the market, and that can't happen without R&D. You have to spend money to make money, as they say.
Merck, a company I once called a bloated garbage heap of stale drugs, will actually see revenue increase in 2011 compared to the flat sales growth it saw this past year. Merck is guiding for revenue growth in the low- to mid-single-digit percent range.
The guidance assumes that Merck will be able to hold on to its right to sell Johnson & Johnson's
Adjusted EPS for next year don't look too shabby at $3.64 to $3.76, which is a 6.4% to 9.9% increase over the 2010 level. The earnings guidance could have been higher had it not been for health care reform costs and pricing pressure in Europe cutting into margins.
Longer term, earnings will likely suffer from weak -- if any -- sales of vorapaxar. The drug appears to increase bleeding and likely won't be used in stroke patients. The drug is used in combination with Bristol-Myers Squibb's
There will be other drugs in the pipeline to take vorpaxar's place, but investors will have to sit tight and wait for their development.
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