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Merck Pharmaceuticals Analysis. Merck is a healthy company to invest in with a diverse portfolio since their merger with Schering-Plough in 2007. Before investing however, there are a few things to consider.

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Introduction

Merck: Leading the World in Pharmaceutical and Chemical Production Amber Stone MGT 531 December 1, 2011 Leslie Ann L. Dunn, MBA, JD Merck: Leading the World in Pharmaceutical and Chemical Production Even though Merck faces threats from generic competition, they are the world's leader in healthcare and chemical production because their pioneering inventions save lives which drives continued sales growth. As a mutual fund manager, big pharma means big business. After all, there's no doubt that medicine saves lives. Both innovative and lucrative, Chief Research Officers agree that risky pharmaceutical investments can lead to great returns. Merck is a healthy company to invest in with a diverse portfolio since their merger with Schering-Plough in 2007. Before investing however, there are a few things to consider. Strengths Weaknesses * Increased late stage R&D pipeline * Consistent output of blockbuster products * Gardasil and Zostavax patent extension * Balance of high and low risk products * Expansion of innovative biotechnology and pharmacogenomics * Market expansion through acquisitions * Output of drugs that target niche diseases (Opposite of blockbusters) * Patent expiration dates become public property * Generic competition as patients opt for less expensive treatments * ENHANCE trial effecting spending trends of blockbuster Vytorin and Zeta Opportunities Threats * Merger with Schering-Plough in November 2009 puts them on track to be the second largest big pharma * Schering-Plough's recent merger with Organon Biosciences broadening women's health and animal health portfolios * Acquisition within the immunology & inflammation portfolio adding $2+ billion annual sales * Population continually aging causing increased product demand * Patients increasingly have access to unbiased drug information and current litigation which may lead them to switch prescriptions * Unexpected success of the Wyeth and Pfizer merger through cost cutting * Billions at stake from J&J litigation * Regulatory failure of products in late stage pipeline Upon aligning forces with its Zetia/Vytoria marketing partner who had recently acquired Organon Biosciences, Merck vastly improved their late-pipeline and increased their market share of women's health and animal health products. ...read more.

Middle

MPMB also states that Anti-TNF drugs are expensive not only expensive but have adverse side effects. The drugs are also not effective in chronic disease treatment (MPKB 1). When Pfizer merged with Wyeth, together they formed a pharmacaceutical company that had yet to be seen. In 2008 the companies' total sales tipped the scale at over $70 billion. Their prescription sales were $10 billion shy of their total around $60 billion (PharmaWatch 32). In evaluating the Pfizer-Wyeth merger, according to Pharma Watch, one must take into consideration that in order for it to be profitable, they must cut cost aggressively. To find the revenue loss resolution, they must consider all options for overhead reduction (34). In conclusion, although Merck faces significant financial risk upon patent expiration of their highest selling products, they remain a world leader in healthcare and chemical production for two main reasons. First, Merck has continued sales growth. But most importantly, Merck saves lives with their innovative inventions. As mutual fund manager, based on the information gained from this analysis the strongest aspects of the SWOT analysis that influence my decision to invest in this company are its increased late stage R&D pipeline, consistent record of successful blockbuster products and recent portfolio expansion with the Schering-Plough merger. PART II Merck's overall financial health shows positive future revenue growth potential. According to Merck's income statement and by my calculations, there was a 32% profit increase in 2009 alone. This means that Merck earned an additional 8,926,000 annually on top of their 2008 earnings. In 2010 Merck increased their earnings by 40% gaining an impressive 18,559,000 annually on their already remarkable 2009 profits. Overall, between 2009 and 2010 post Schering Merger, the company has managed to increase their take home by almost 300%. With these calculations, I gather that Merck is in terrific financial health ("Merck Annual Report" 2011). Merck's Income Statement reflects continued revenue growth potential. ...read more.

Conclusion

Currently Merck has a wide variety of products with no specific focus. The idea behind Pfizer's plan is to concentrate on all the major diseases that are effecting the population which will increase the demand for the drugs or therapy. In other words, by marketing products for major illnesses they are able to maximize full blockbuster drug potential. Also, Pfizer is breaking pharmaceutical ground by expanding into China. By forming a partnership with Japanese pharmaceutical firm Takeda they are able to promote the Type 2 Diabetes Actos (part of their "Invest to Win" strategy) across China (13). From a global perspective Merck can look to Pfizer's innovative strategy to develop treatments for cancer types that are common in East Asia (14). References Abbott Financial Statement. (2011). Retrieved from http://finance.yahoo.com/q/is?s=ABT+Income+Statement&annua Amst,Catherine, Amy Barrett, Michael Arndt, and John Carey. 2004. "THE WANING OF THE BLOCKBUSTER." Businessweek no. 3904: 36-38. Business Source Complete, EBSCOhost (accessed November 23, 2011). Anti-TIF. (2010). Retrieved from http://mpkb.org/home/othertreatments/antitnf Big Pharma's Comeback. (2010). Retrieved from http://www.forbes.com/sites/matthewherper/2010/11/15/big-pharmas-comeback/ Big Pharma's 2009-2013 Patent Cliff. (2010). Retrieved from http://aladinrc.wrlc.org/bitstream/1961/9359/1/Jardines,%20Ben%20-%20Spring%20'10%20(P).pdf BMY Annual Income Statement. (2011). Retrieved from http://finance.yahoo.com/q/is?s=BMY+Income+Statement&annual Collins, T. P. (2010). Is Gardasil Good Medicine?. National Catholic Bioethics Quarterly, 10(3), 459-469. DATAMONITOR: MarketWatch: Pharmaceuticals. Retrieved from http://www.farmavita.net/content/view/1059/51/ on November 23, 2011. DATAMONITOR: Merck KGaA. (2010). Merck KGaA SWOT Analysis, 1-8. References DATAMONITOR: Schering-Plough Corporation. (2009). Schering-Plough Corporation SWOT Analysis, 1-10. Granier, L., & Trinquard, S. (2010). Entry Deterrence and Mergers under Price Competition in Pharmaceutical Markets. Applied Economics, 42(1-3), 297-309. Herper, M. (2011). The Blockbuster Drug Comes to an End. Forbes, 187(7), 26. J&J acquires Merck's stake in joint venture. (2011). Retrieved from http://finance.yahoo.com/news/JJ-acquires-Mercks-stake-in-apf-2857310221.html?x=0 Kesit, D. (2009). Strategic Analysis of the World Pharmaceutical Industry. Management, 14(1), 59-76. Laustsen, G., & Neilson, T. (2007). Drug news. Prevent shingles with Zostavax. Nurse Practitioner, 32(6), 6-7. Merck and Patent Monopolies. (2007). Retrieved from http://helvidiuspachyderm.wordpress.com/2007/02/19/merck-and-patent-monopolies/ Merck Annual Report. (2011). Retrieved from http://www.merck.com/investors/financials/annual-reports/ar_2010.html Merck Deploys Web-Based Visualization and Data Analysis Solution Enhancing Drug Discovery Efforts. (2011). Retrieved from http://spotfire.tibco.com/~/media/Files/Collateral/Case-Studies/Merck. ...read more.

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