This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

In These Turbulent Times, Reach for Merck

I'm not convinced REVEAL will show a clinically meaningful effect for anacetrapib, but I think there's a reasonable chance. If it does, Merck would have a novel drug with mega-blockbuster potential. Most importantly, investors might not even need to wait for the data. Merck shares will likely gain ground in anticipation of the results, which should be available in 2015.

Merck is also conducting Phase III trials of Tredaptive, a niacin-based HDL booster, for the treatment of atherosclerosis. Results from this study, named HPS2-THRIVE, should be available within the next six months. Although I doubt HPS2-THRIVE will succeed due to the failure of other niacin-based HDL studies, positive data would be a meaningful near-term upside surprise. If nothing else, Tredaptive is another low-expectation, high-impact arrow in Merck's HDL quiver.

Other Drugs to Watch

Large-cap pharma companies usually have massive R&D pipelines and multiple marketed products, so it's impossible to discuss everything in such a condensed format. Nonetheless, there are a few other products worth watching.

Merck recently announced that a Phase III trial of odanacatib, a novel drug candidate for the treatment of osteoporosis, had demonstrated sufficiently robust efficacy to warrant early stoppage. Odanacatib works by blocking cathepsin K (cat-K), an enzyme responsible for bone resorption, which is a fancy medical term for the process by which the body breaks down bone. In osteoporosis, unbalanced resorption leads to a steady decline in bone density. Merck expects to submit for global regulatory approval in the first half of next year. If approved, odanacatib could easily generate sales of $1 billion to $2 billion.

The company's diabetes franchise remains anchored by Januvia, the dominant DPP-4 inhibitor class drug. I expect sales of Januvia and related drugs -- Merck has a combination product with metformin on the market and several other variants in the pipeline -- will continue to grow rapidly. Notably, despite the recent acquisition of Amylin Pharmaceuticals by Bristol-Myers Squibb and AstraZeneca, I doubt Bydureon will be a major impediment to Januvia's growth.

A few other notable mentions: Merck plans to resubmit Bridon, an agent for anesthesia reversal, for FDA approval this year. Despite some safety concerns, Bridon could do better than expected should it reach the market. Finally, I'm skeptical of the company's novel insomnia drug suvorexant, which will also be submitted for regulatory approval this year, due to my dislike of orexin modulation as a mechanism-of-action -- orexin is a neurotransmitter that regulates sleep-wake cycles and appetite -- and the abundance of adequate generic alternatives. However, management seems very excited about the product, so it's probably worth keeping an eye on going forward.

Merck currently trades at less than 12 times consensus earnings for 2013, the company's "trough" EPS year. I think this multiple could expand as the company returns to earnings growth, especially if excitement about the pipeline builds. In exchange for a little patience, investors also collect nearly 4% in annual dividends. It's not the most exciting recommendation, but Merck seems like a solid long position in turbulent times.

Stock quotes in this article: MRK 
Nathan Sadeghi-Nejad has 15 years experience as a professional health-care investor, most recently as a sector head for Highside Capital. He has worked on the sell side (with independent research boutiques Sturza�s Medical Research and Avalon Research) and the buyside (at Kilkenny Capital prior to Highside). Sadeghi-Nejad is a graduate of Columbia University and lives in New York. You can follow him on Twitter @natesadeghi.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,408.54 -16.31 -0.10%
S&P 500 1,864.85 +2.54 0.14%
NASDAQ 4,095.5160 +9.2910 0.23%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs