Merck (MRK) shares are currently trading around $38.50, at the high end of its 52-week range of $29.47 to $39.00. Its last 12-month earnings per share of $1.37 places its shares on a trailing price to earnings ratio of 28.12, and forecasts for earnings going forward place the shares on a forward price to earnings ratio of 10.04. This compares with competitors Bayer (BAYRY.PK) at a forward price to earnings ratio of 8.72, GlaxoSmithKline (GSK) at 13.23, and Pfizer (PFE) at 9.34.
Last year, the company was beset with problems. It was forced to pull blood thinner vorapaxar at late stage trials due to risks of blood thinning. Next on the list of disasters was the halt of studies into a vaccine for Staph infections because patients who received the vaccine were proven to be more at risk.
On the upside, Merck managed to resolve a dispute with Johnson and Johnson (JNJ) that threatened to cut revenue from its marketing of Remicade and Simponi, and it is making headway toward its target of 25% of its revenues coming from Asia. It recently announced the opening of a R&D headquarters in Beijing, China, as part of a commitment to invest $1.5 billion in the country. This should fit in well with its existing manufacturing plants in China, and is a good move in ambitions to expand in expanding markets.
However, in its fight for market leadership, it seems that Merck will be pursuing a strategy of looking for deals to purchase drugs in late testing to augment its pipeline of drugs likely to come to market this year.To continue reading, click here.