Biotech Values

[DewDiligence]

Speaking of MRK, I’ve become more bearish lately for a number of reasons:

• The US patent on Singulair—MRK’s biggest-selling drug at $4.5B/yr—is under assault by Teva; moreover, the USPTO is independently reviewing the validity of the patent. Even if MRK prevails on these actions, Singulair loses US patent protection in Aug 2012.

• MRK’s attempt to “evergreen” Singulair by combining it in a pill with Claritin was rejected by the FDA (#msg-28812771).

• Certriad, the combination pill from AZN and ABT (#msg-38449725), has the potential to make the Vytorin/Zetia franchise irrelevant. (Vytorin/Zetia sells about $4B/yr and its profits are split 50/50 between MRK and SGP.)

• MRK/SGP will in all likelihood have to make some concession to JNJ with respect to SGP’s ex-US rights for Remicade and Simponi (#msg-38036981).

• I question whether MRK has what it takes to be a major player in FoB’s (although the GlycoFi platform may have value in producing branded biologics): #msg-34365756, #msg- 34067807.

• MRK and SGP appear to have adopted a policy of radio silence about Boceprevir, and that makes me wonder….

Of course, MRK’s stock has a high dividend yield and a low valuation; however, in spite of this, I think there are better Big Pharma selections at current prices.