Merck Chairman Dismisses Merger Idea - TheStreet

Merck

(MRK) - Get Report

Chairman and CEO Raymond V. Gilmartin on Tuesday dismissed a possible merger as a solution to the company's current problems, while promising more partnerships as part of a stepped-up pipeline of new products in the coming years.

Addressing shareholders and analysts at the company's annual meeting, Gilmartin said a "large-scale merger would provide, at best, a short-term boost with an expensive long-term cost."

Gilmartin made his comments amid growing concerns about the declining fortunes of the nation's No. 3 drugmaker. Merck's recent past is littered with failure and disappointment, including a stock price in the low $40s -- a far cry from the $79.66 of three years ago or the $63 it fetched as recently as June.

Gilmartin said that by 2006, when its money-spinning Zocor goes off patent, the company will be in the launch phase of two new products, Zetia/Zocor and Arcoxia, which have "significant sales potential and

will make substantial contributions to earnings."

In the next two years, the company also expects to be filing for approval of a number of other medicines and vaccines, including ones for the prevention or treatment of diabetes, cervical cancer, shingles and chicken pox.

Gilmartin also highlighted increased efforts to form profitable partnerships, saying they improve the company's pipeline, growth and shareholder value. So far this year, Merck has completed 40 deals with external partners, four times the number of 1999, and is reviewing 80 others.

Prior to the Tuesday's annual meeting, Merck has been something of a case study in diminished expectations.

The Whitehouse Station, N.J., drug giant expects 2003 earnings to come in at the low end of its previous range of $2.90 to $2.94 a share. For 2004, it is forecasting $3.11 to $3.17 a share.

The company also expects pretax restructuring charges of $75 million to $125 million next year, reflecting the continuing cost of the 4,400 job cuts it announced in October.

And in November alone, the company came up empty twice, ending testing on a depression candidate known as Substance P and discontinuing a phase III trial of a diabetes candidate.