Second, I think investors underestimate Merck's pipeline. Although several Wall Street analysts have highlighted the company's R&D optionality -- Tim Anderson at Sanford Bernstein and Mark Schoenebaum at ISI have done particularly good work -- the investment community still has an overly skeptical view. The Future of Dyslipidemia? Veteran investors will remember the epic failure of Pfizer's torcetrapib, a drug intended to boost levels high-density lipoprotein (HDL, or "good" cholesterol) that failed in late 2006 due to adverse events. More recently, Roche announced the failure of a Phase III trial of dalcetrapib, a drug in a closely related cholesteryl ester transfer protein (CETP) modulator class that had fewer side effects. Merck has a CETP inhibitor of its own, called anacetrapib, in Phase III trials. Despite the history of failure for this drug class, I think anacetrapib might work. Here's why. 1. Anacetrapib has a much more pronounced effect on low-density lipoprotein (LDL, or "bad" cholesterol) and HDL than did either torcetrapib or dalcetrapib. In earlier studies, anacetrapib lowered LDL by 40% and raised HDL by 138%. This impact is far greater than for Pfizer's torcetrapib, which lowered LDL by only 25% and raised HDL by 72%. Roche's dalcetrapib was even less effective than torcetrapib. I view anacetrapib's LDL benefit as a "safety net" for the HDL hypothesis. Multiple studies show that reducing LDL has a beneficial impact on cardiovascular outcomes, even when the patients' baseline is low. That means anacetrapib could show improved clinical outcomes even if the HDL hypothesis proves false. 2. Merck's Phase III trial of anacetrapib, named REVEAL, has enrolled roughly 30,000 patients. Roche's failed OUTCOMES Phase III study enrolled only half as many patients. The study size gives the company more statistical power to detect an effect. 3. Early anacetrapib data show hints of efficacy and a reasonable safety profile. In Merck's Phase II trials, anacetrapib didn't show any significant toxicity. Further, the drug has no impact on levels of aldosterone, a steroid secreted by the adrenal gland that may have contributed to torcetrapib's downfall. Intriguingly, anacetrapib recipients also had a trend towards fewer cardiovascular events. In much larger studies, this benefit could prove statistically significant.