Three Things You Need to Know From Merck & Co., Inc. (MRK)’s Q2 Earnings

Anesthesia drug sugammedex encountered yet another delay from the FDA recently. The agency had already delayed review by three months in March. Now, the FDA is asking for more time to take a look at results from an inspection of a clinical trial site. This development certainly adds to frustration for Merck, but I expect sugammedex will ultimately gain approval in the U.S. — just as it has done in many other countries.

The FDA did grant approval in May for Merck’s new cholesterol drug, Liptrozet. Technically, the drug really isn’t all that new. Liptrozet combines Merck’s Zetia with a generic version of Pfizer Inc. (NYSE:PFE)‘s Lipitor. With peak sales estimates of $500 million or so, Liptrozet should help Merck make up somewhat for lost Singulair revenue but much more will be needed.

Observers have had great hopes for osteoporosis drug odanacatib, which Merck licensed from Quest Diagnostics. Barclays previously projected peak annual sales of around $2 billion by 2020. However, earlier this year Merck made comments that raised concerns that odanacatib’s safety profile.

There seems to be a general murkiness surrounding Merck’s pipeline prospects right now. That being said, the company’s pipeline does have considerable potential — if Merck & Co., Inc. (NYSE:MRK) has a little better luck in the days ahead than it has had this year.

Buy, sell, or hold?
Merck looks relatively expensive compared to peers when we look at its price-to-earnings value. Its trailing P/E of almost 25 stands higher than its partner AstraZeneca plc (ADR) (NYSE:AZN), Eli Lilly & Co. (NYSE:LLY), and Pfizer Inc. (NYSE:PFE), which have multiples of 14, 12, and 11, respectively. Bristol Myers Squibb Co. (NYSE:BMY) is the only big pharma that appears more expensive than Merck, with a trailing P/E of nearly 54.

Each of these other pharmaceutical firms have their own issues, though. Bristol Myers Squibb Co. (NYSE:BMY) and Eli Lilly & Co. (NYSE:LLY), in particular, face their own revenue challenges in the days ahead from expiring patents. Pfizer Inc. (NYSE:PFE) has its continued woes from declining Lipitor sales, but it seems to be in a better position for the future than several of the other companies.

There’s nothing about Merck & Co., Inc. (NYSE:MRK) right now that screams “buy” to me. However, there also is no compelling reason to dump shares, in my view. I think holding on to Merck makes sense.

The article 3 Things You Need to Know From Merck’s Q2 Earnings originally appeared on Fool.com and is written by Keith Speights.

Fool contributor Keith Speights has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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