Thursday, December 8, 2011

Credit Suisse Lowers Its Merck 2012 EPS Estimates; Keeps $44 Target

The notion that Credit Suisse is still holding on to this relatively high price target (in light of looming patent cliffs, a thin pipeline and a still-very-tough global economy) might be hard to figure. It might be hard to figure, if we hadn't looked at the two recent allocations of Merck's December 7, 2010 debt offering, and (even more impressively, its) 2009 debt offering business -- these are very high margin, easy chunks of substantial business -- for the securities underwriting side of the Credit Suisse sprawling investment house.

And so, Credit Suisse has a note out, on Merck, and tersely summarized in Divdend Stocks this morning, thus:

Pharmaceuticals giant Merck & Co., Inc. on Thursday saw its earnings estimates lowered by analysts at Credit Suisse.

The firm said it cut its estimates for Merk through 2013, noting that AstraZeneca plc will likely exercise its call option on heartburn drugs Nexium and Prilosec. Under a previous agreement between the two drug giants, AstraZeneca retains the right to repurchase Merck’s interests in Prilosec and Nexium in the U.S. in 2012. . . .

But still Credit Suisse holds $44 as the Merck NYSE price target. I think a more realistic 12 month target (even in a recovering global economy) is closer to $38. Having said all of that, I still believe Credit Suisse's analysts have complied with their (rather meager) "honest opinion" duties, under SEC Reg AC.

As ever, we shall see.


Anonymous said...

I believe this note came out ahead of the data that seems to link pancreatitis to Januvia use. I saw the story over on Pharmalot but haven't seen it affect the stock or enter into analysts commentary even though a poll of doctors had 11% respond that they plan to stop prescribing Januvia because of it.

condor said...

The pancreatitis/Januvia hypothesis isn't really very new -- see this September 2009 FDA warning -- and Januvia has been seeing pretty solid growth in the US, quarter after quarter.

For its part, Merck has long maintained that pancreatitis is an inherent risk of having Type II diabetic-patients on Januvia (i.e., part of the disease itself, not so much a side-effect of the drug).

Namaste -- and do stop back!

I think there would have to be a more definitive, and damning outcome to really affect Merck's NYSE price. But we shall see.