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MRK, win some lose more

Accendo Markets
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Based in Whitehouse Station, NJ, Merck & Co. (NYSE:MRK) , Inc. is a global research-driven pharmaceutical products company. Similar to many pharma giants, Merck almost tap all the major disease areas. It is currently evaluating strategic alternatives for certain parts of its business so that it can streamline operations and focus on certain therapeutic areas. In 2009, Merck acquired Schering-Plough for $41.1 billion. The company is also selling off its Consumer Care business to Bayer the deal is slated to close in the second half of 2014. Meanwhile, Merck acquired hepatitis C virus (HCV) focused company Idenix Pharmaceuticals in Aug 2014. In July, the company laid off 600 sales reps, building on its previously-announced plan of laying off 8,500 workers to save $1 billion in R&D costs and other expenses.

2015 outlook

It has been a roller-coaster ride of a year for Merck, complete with M&A and corporate bloodletting intended to swing the company’s numbers northward. Part of the drugmaker’s turnaround plan could be paying off, as cost cuts delivered third-quarter earnings that beat analysts’ expectations. But slumping sales of some of its standout products, and an ongoing slide in profits, signal more work to come.

Mixed information on pipeline

Generic competition for Singulair continues to take its toll, with the former megablockbuster a shadow of its former self. Gardasil turned in less-than-promising numbers; the HPV jab brought in $590 million during the third quarter, an 11% decrease year-over-year. Though the Januvia and Janumet franchise grew by 5% year-over-year, the $1.4 billion in quarterly sales was a decline compared with last quarter’s $1.58 billion.

And then, there’s the company’s hep C franchise, which is struggling under the weight of Gilead Sciences’ (NASDAQ:GILD) blockbuster Sovaldi. Merck in June shelled out $3.8 billion for Idenix Pharmaceuticals (NASDAQ:IDIX) to get its hands on that company’s three drugs to treat the virus, and is hard at work on a Sovaldi rival.

But it isn’t all doom and gloom for the Whitehouse. Merck is celebrating regulatory approvals for promising cancer therapy Keytruda. In September, the FDA greenlighted the drug for the treatment of melanoma, and on Monday Keytruda won the agency’s “breakthrough” designation for advanced non-small cell lung cancer, moving the company one step closer to full regulatory approval for the product. Merck needs all the good news it can get on the R&D front. Long a laggard among the Big 10 drug developers, Merck reported that its Q3 pharma sales dropped 4% year-over-year as generics took a deeper bite into sales revenue. The prospect that big new products like Keytruda can point those numbers back north is the company’s main defense now against unhappy investors.

Not yet a great year

Merck reported sales of $44 billion in 2013. Third-quarter net income dropped to $895 million from $1.12 billion last year, and Merck slashed its adjusted earnings forecast for the year to $3.46 to $3.50 a share from $3.43 to $3.53 a share. Global sales fell 4% to $10.6 billion, and pharmaceutical sales decreased 4% to $9.1 billion on the quarter, the drugmaker said in an earnings statement.

“Annie Zeng is a final year PhD candidate in Pharmacology at the University of Cambridge, UK. She joined Accendo Market’s team covering Life Science sector as an analyst from October 2014″

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