Is Merck & Co., Inc. (MRK) Destined for Greatness?

Merck’s hardly alone in its losing battle against generics. One of the best-selling drugs in history went off-patent in November 2011 — Lipitor, the anti-cholesterol drug that was Pfizer Inc. (NYSE:PFE)‘s golden goose, generating close to $9.6 billion in sales in its last patent-protected year.

Going forward, the Merck’s revenues will be supported by the sales of other drugs such as diabetes treatment Januvia, which recorded 18% sales growth to $1.1 billion in the fourth quarter. A broad revenue base, with robust growth from its diabetes franchise and its vaccines, should partly offset Merck’s patent pain until the company can establish a new base of blockbusters and return to growth after weaning itself off Singulair’s hefty sales. Merck & Co., Inc. (NYSE:MRK)’s long-term growth potential  is significant, based on a slew of new treatments for atherosclerosis, thrombosis, and hepatitis C. Out of these, Barclays estimates that osteoporosis drug hopeful Odanacatib could generate $2 billion in annual sales by 2020. Merck doesn’t seem to be overly dependent on any one particular drug in its pipeline. However, Anacetrapib for atherosclerosis and MK-8931 for Alzheimer’s could both produce significant revenue streams.

Merck’s new R&D head Roger Perlmutter is moving quickly to overhaul Merck’s Research Laboratories (MRL). Various senior management roles have also been eliminated to streamline Merck’s operating model and reduce its cost structure. Merck also remains attractively valued, boasting a forward P/E of 13.2 and a price-to-book at the lower end of its historical valuation. The company has also announced that it will buy back up to $15 billion of its shares, which should provide some positive momentum depending on how smartly the buyback is managed.

Putting the pieces together
Today, Merck & Co., Inc. (NYSE:MRK) has few of the qualities that make up a great stock, but no stock is truly perfect. Digging deeper can help you uncover the answers you need to make a great buy — or to stay away from a stock that’s going nowhere.

The article Is Merck Destined for Greatness? originally appeared on Fool.com and is written by Alex Planes.

Fool contributor Alex Planes and The Motley Fool have no position in any of the stocks mentioned.

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