Biotech Values

[DewDiligence]

Merck, Wyeth Swap Spots

http://blogs.wsj.com/health/2008/07/22/merck-wyeth-swap-spots-in-investors-eyes

›by Sarah Rubenstein
July 22, 2008

Fortunes in Big Pharma sometimes turn on a dime.

dimeLast year, Merck was the darling of the industry, as sales of some new products grew at a healthy clip and the company turned the corner in litigation over Vioxx. Shareholders rewarded Merck handsomely, driving its share price up 33% in 2007, making it the second-best performer in the Dow Jones Industrial Average.

Wyeth, meanwhile, couldn’t seem to do anything right, at least in the second half of 2007, when it had a string of pipeline disappointments, among other headaches. Its shares fell 13% over the year as its executives tried to do damage control.

But now, Merck can’t seem to break out of a streak of bad news — of course, Vytorin, but also some sales weakness of other products and failure to win approval of a new cholesterol drug [Cordaptive]. As of yesterday’s close, the shares were off 39% for the year, and they’re down another 11% in afternoon trading. [At Tuesday’s close, MRK shares are down 46% during 2008.]

In a conference call with investors today, Deutsche Bank analyst Barbara Ryan put it bluntly about Merck:

“This has been death by a thousand cuts this year, and every time you think it’s safe to step into the water and the stock is cheap enough, yet another surprise comes out — a negative one — and the stock goes lower still.”

Wyeth, meanwhile, is the one that’s on the upswing. Most significantly, its share price is being bolstered by investor hopes around an Alzheimers drug, bapineuzumab, the company is developing with Elan. “There clearly is a premium in the [share] price for the enthusiasm behind bapineuzumab,” Ryan said. Unlike a number of Big Pharma players, Wyeth’s shares are actually up so far this year, to the tune of 5%. That’s not huge, but it’s an accomplishment in a year of broad market turmoil.

Stay tuned next week when Wyeth elaborates on bapineuzumab’s mid-stage study results. So far they’ve looked good, but not great.‹