Has Merck's comeback turned into a wipeout?
Under chief Richard Clark, an unassuming company lifer, Merck (nyse: MRK - news - people ) staged a seemingly amazing turnabout from the dark days of 2004, when it had to stop selling the painkiller Vioxx after its own studies linked the drug to an increased risk of heart attack and plaintiffs' lawyers swarmed the company.
But though Merck's share price surged to pre-Vioxx highs early this year as Clark settled the litigation for just $5 billion and got eight drugs approved in two years, the stock now sits at a Vioxx-era $26, down 50% in 11 months. Don't just blame the financial crisis--that's the worst performance of any big pharmaceutical company this year.
An earnings guidance call Thursday and a meeting with analysts at company headquarters Dec. 9 will give Clark a chance to soothe Wall Street. The problem will be making analysts feel they haven't heard it all before.
One of Clark's first moves, in 2005, was to cut 7,000 jobs; Merck just announced it would cut 7,200 more. He's promised "fundamental changes" to the company's business model. But really getting Wall Street's attention will require unveiling a truly impressive research surprise or announcing a big acquisition.
"I want to like Merck, but they keep not succeeding," says Les Funtleyder, health care strategist at Miller Tabak. "They have some decent people and a very good research structure, but we have to go with the facts and the fact is success has been elusive."
Merck's total sales will drop 1% to $23.9 billion next year, according to analyst John Boris at Citigroup. He's bullish because the stock is so cheap, but in a recent report, he laid out the challenge Merck will face in 2009: Sales of top-seller Singulair, for allergies and asthma, will barely grow because of safety worries, and generics maker Teva Pharmaceuticals (nasdaq: TEVA - news - people ) could launch a copycat ahead of schedule. The company's vaccines division has stumbled due to manufacturing and marketing issues that executives need to fix--fast.
Has Merck's comeback turned into a wipeout?
Under chief Richard Clark, an unassuming company lifer, Merck (nyse: MRK - news - people ) staged a seemingly amazing turnabout from the dark days of 2004, when it had to stop selling the painkiller Vioxx after its own studies linked the drug to an increased risk of heart attack and plaintiffs' lawyers swarmed the company.
But though Merck's share price surged to pre-Vioxx highs early this year as Clark settled the litigation for just $5 billion and got eight drugs approved in two years, the stock now sits at a Vioxx-era $26, down 50% in 11 months. Don't just blame the financial crisis--that's the worst performance of any big pharmaceutical company this year.
An earnings guidance call Thursday and a meeting with analysts at company headquarters Dec. 9 will give Clark a chance to soothe Wall Street. The problem will be making analysts feel they haven't heard it all before.
One of Clark's first moves, in 2005, was to cut 7,000 jobs; Merck just announced it would cut 7,200 more. He's promised "fundamental changes" to the company's business model. But really getting Wall Street's attention will require unveiling a truly impressive research surprise or announcing a big acquisition.
"I want to like Merck, but they keep not succeeding," says Les Funtleyder, health care strategist at Miller Tabak. "They have some decent people and a very good research structure, but we have to go with the facts and the fact is success has been elusive."
Merck's total sales will drop 1% to $23.9 billion next year, according to analyst John Boris at Citigroup. He's bullish because the stock is so cheap, but in a recent report, he laid out the challenge Merck will face in 2009: Sales of top-seller Singulair, for allergies and asthma, will barely grow because of safety worries, and generics maker Teva Pharmaceuticals (nasdaq: TEVA - news - people ) could launch a copycat ahead of schedule. The company's vaccines division has stumbled due to manufacturing and marketing issues that executives need to fix--fast.
