Matt Herper Calls New CEO Frazier "Courageous." He Is.

No doubt, Mr. Frazier's move, as earlier blogged here, this morning: to break from Pfizer's lead (and Wall Street's desires) -- and begin what he hopes will be a longer term era of under-promising, and over-delivering -- is truly courageous.

The question, though is whether Wall Street analysts, and his shareholders, will be patient enough to see it through -- past 2013. Here's a bit of Matt's excellent perspective piece, in Forbes -- do go read it all:

. . . .Analysts on Merck’s conference call were skeptical about the reasoning behind the guidance change. Catherine Arnold of Credit Suisse, who called the change “befuddling” in her note to investors, told Frazier that investors expected Merck to “share the pain” of shareholders and noted that vorapaxar, launching in 2012, should have been a “drag on earnings, not a positive.” Frazier replied that Merck’s cost-cutting efforts were ahead of schedule, but that he was faced with a decision to either withdraw guidance or commit to cutting projects that could make money in the future. He also argued that because Merck’s sales reps already visit cardiologists to sell heart drugs, selling vorapaxar, too, would not cost much more.

Timothy Anderson of Sanford C. Bernstein noted that both health care reform in the U.S. and European headwinds were well known, and also questioned how vorapaxar could affect 2013 earnings. Did other pipeline setbacks play a role? Anderson mentioned specifically of Merck’s AIDS drug Isentress, a blockbuster that analysts expect to double in sales to $2 billion over the next five years, failing to work at a once-a-day dose. That leaves Merck vulnerable to competition from Gilead and GlaxoSmithKline. . . .

I must dutifully also note -- despite how much I like Mr. Frazier, personally -- that withdrawing guidance allows Merck to keep the J&J arbitration negotiations (if any there be) under wraps, until complete. It may all also be a smokescreen/cover move, to be able to conduct the arbitration setttlement agreement negotiations in complete secrecy -- and not disclose -- even once there is agreement on price and structure.

This then all becomes akin to an M&A contingency, because Merck no longer has to alert investors when the guidance becomes un-reachable, due to a probable payment to J&J. . . because there is "no guidance" to support. I hope this is not the case, but I have to admit that it is a real possibility.