Sunday, May 1, 2011

Merck, Crystal Balling: What Are The Near Term Odds, For a Deal Of Size

I guess now (contra to my sense, a month ago, when I first ginned up the graphic at right!) I'd put a large deal in the "not-likely" category, for the balance of 2011. 2012 may well be a different story, however -- as the looming Q4 2011 $3.8 billion patent fall-off really takes hold at New Merck.

And so, here is a great question, from our anonymous commenting audience:

. . . .Now that the dust is starting to settle a bit more what do you think is next for Merck? Remicade issue has been resolved; Animal Health is to stay in house. Obviously, you'd prefer Merck to invest some cash in growth rather than purchase stock. What do you think makes sense for Ken Frazier?? Finish bust up of Schering by selling consumer business? Follow Pfizer's lead and bust New Merck apart??

April 27, 2011 10:14 p.m.. . . .

Then here is my answer:
. . . .I think I said somewhere that I didn't expect any Earth-shattering news from Whitehouse Station, on any of its business lines, so long as Q1 2011 earnings were on track.

And they were, this past Friday.

I see a fair amount of small-scale pruning still to be done by Frazier, business by business -- but no massive moves, near term.

He has reaffirmed that Consumer Halth is a core business, at New Merck, but in the same breath would not rule out a partner -- so, if there is a deal of size yet in 2011, it might be a co-venture in Consumer Health.

It seems that most or all of Animal Health might also be partnered up, or spun-off -- in 2012 or beyond.

Relatedly, Q1 2011 earnings were actually in-line, not a "beat" (as claimed by Merck, on a non-GAAP basis) -- when one considers the quarter-by-quarter management discretion now available at the R&D expense line -- for more on the "fuzzy math" in the Q1 2011 EPS "beat," see my later post here.

Namaste -- and great set of questions, Anon. . . .

So it goes.


Anonymous said...

As a former SP and now Merck employee, thanks for keeping your blog going - it is extremely informative!

Anonymous said...


Anonymous said...

They seem to be integrating AH with Merck folks already & quickly. I do think AH will be part of Merck for a long time.