Monday, February 4, 2013

Post Earnings Call, Leerink Swann Rates Merck "Market Perform"

And that's likely the primary reason Merck is declining more than the rest of big pharma on the NYSE this morning.


Sam said...

What do you think of the MS downgrade?

"...saying there's 75% chance that the large "Improve-It" study of its cholesterol drug Vytorin will fail. If that's the case, the stock could decline by double-digits on a percentage basis"

Is this plausible?

Condor said...

Hello Sam --

Thanks for the question. I think Morgan Stanley taking it from a "Equal Weight" to a "Under Weight" (i.e., Sell) is slightly overwrought.

I do agree with Morgan Stanley that there is a fairly small chance that IMPROVE-IT shows any benefit. But taht is hardly going to be news. There have been three other studies that point in that direction.

Said another way, the entire thesis being tested in IMPROVE-IT is already pretty much doubt-riddled.

The worldwide sales figures (2009 to 2012) for Vytorin and Zetia reflect this.

I think most of IMPROVE-IT as a null result is priced in to the MRK NYSE quote this morning.

Early last week, I said that $43 was about the low end of fair value for Merck. That was before we knew that Merck was pushing the next gen osteoporosis candidate by a full year -- to 2014.

Now, I think the low end of fair vaule for Merck is probably $41.50 or so.

But -- to be clear -- I don't really buy the idea of a huge selloff if IMPROVE-IT comes out badly. I think that's pretty much priced in.

We shall see.

Namaste -- do stop back!

Condor said...

Excuse the typos, above -- iPhone impairment.