This one would be hard to figure, if one didn't look at the most-recent allocation of Merck's debt offerings business among the investment banks.
Credit Suisse has a positive note out on Merck in Barron's Online this morning, thus:
. . . .Animal Health, Consumer and International Pharma offset U.S. Pharma weakness. Merck's revenue for the quarter came in $107 million under consensus, but $15 million above the Credit Suisse estimate. The weakness was in U.S. Pharma, most notably Singulair, Gardasil and Zostavax, but this was overcome by strong performance by products such as Remicade and Januvia, as well as the nonpharma divisions. . . .
To be clear, I am certain that Ms. Arnold has complied with SEC Reg AC (much earlier background on that rule) -- that is, I am sure these are her genuine views -- just as I am equally sure she is allowed to take the interests of her firm into account, when she writes. Even so, two paragraphs from those sunny points, above, Ms. Arnold points to potential "take-backs" of two of those three 2010 drivers:
. . . .Catalysts: (1) Late September: Arbitration hearing with Johnson & Johnson on control of rights to autoimmune franchise (Remicade, Simponi); (2) Oct. 29-Nov. 2: Phase III data for boceprevir expected at the 2010 American Association for the Study of Liver Diseases Meeting; (3) Oct. 29: Food and Drug Administration Action Date for Bristol-Myers Squibb/AstraZeneca's Onglyza+Metformin fixed-dose combination, potential competitor to Merck's Janumet. . . .
So -- two of the three bright spots through the first half may evaporate in the second half -- and boceprevir (the third) is being soundly beaten by Vertex's telaprevir. On top of all of that, Merck's core pharma business is not growing nearly as much as previously-projected. And still, Credit Suisse has Merck a long-term buy, with a projected relative value of $43.
Fascinating -- especially if one considers that on the June 22, 2009 debt offering tranches depicted at right ($4.25 billion worth), the firm was a joint book-running lead underwriter (i.e., made "lions' share" fees -- for selling bonds that require virtually no effort to place -- most institutions need to hold "A-rated" paper, and that is what Merck's is).
Res Ipsa Loquitur, baby.
Bonus points: Note also that the name of Goldman, Sachs & Co. is missing from that roster of easy fee earners, on Merck's $4.25 billion debt offerings. Why? Take a look at Goldman's coverage during that period. QED.
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