But why, why?? Reading the posts throughout CP makes MRK sound like the Titanic. Somebody is fooling somebody here but who is the fool?? I sure don't want to be!
The Merck Annual Shareholder Meeting is not the place to get a realistic understanding of the state of the company. Frazier is the fool and is fooling the shareholders. Revenue of $44B buys a lot of smoke and mirrors. The transcript offers carefully orchestrated spin.This company is at the peak of dysfunction in every division imaginable and is continuing its slow yet steady ascent to the bottom of the pharma industry. Most employees wonder why analysts and shareholders remain so blind to the retracting financial state of this company as this stock climbs in the absence of anything substantial occurring within the organization. The EC continues to cut the flesh to the bone in so many ways that ensures that the resources needed to grow this company no longer exists. Internal decisions appear to emanate from a bi-polar management that reverses decisions as quickly as the are made often for reasons that were apparent to nearly all before implementation occurred. The rosy future of the pipeline espoused by Frazier and Perlmutter is not supported by any reality in the trenches. The finance whiz kids imagine the purchase of a late stage pipeline that will require no vetting at the scientific level because in their limited experience the ability to separate the wheat from the chaff is a no-brainer. Unfortunately, the scientific talent capable of doing so no longer exists here and such fundamental problems are never apparent to investors until it is too late. As long as Merck continues to get pumped then there is money to be made. However when it collapses, as it most certainly will, a little bit of reflection will leave everybody getting it, in retrospect.
Yes, Wall Street analysts appear to be like lovesick schoolgirls when they look at MRK under the leadership of KF. Why, you ask. It's simple. When they look at KF they see a talented surgeon prepping. He's cleansing and gowning up right now. Soon his talented, dexterous hands will get to work and the cuts will come. Cancers like the "15 x 15 guy", the "F U Merck guy", and the "PCQ" will be excised. The Wall Streeters know that the patient (MRK) will be much stronger after the surgeon has done his work.
He has been part of the executive team since 1992. CEO since since 2010ish. There is a big difference between doing what right for the company and making analysts happy. The stock buyback. Analysts love it. That is great when we have a full pipeline. When we are contracting it's a short term fix. It's saying there is no where better to put the money. Selling profitable units with no vision. R&D was cut by 17%. In most cases a company would throw everything at it. The money starts there and trickles down to everyone else. Buying SP. It's not because it was a bad decision. The bad decisions came after the purchase. Not a single executive knew how to execute, make changes in scale when you have that many employees and understand the different company cultures. Analysts love the cuts. It lowers the cost, increases share value, keeps margins the same with lower sales. Short term. Maybe another 12-18 months it could be done. The problem is we are running out of runway and the plane needs to get airborne. We need MK-3475 to hit big. The question is why partner with Pfizer, Amgen and Incyte if we can take it all?
Some patients die on the table particularly when trauma was the reason they arrived there in the first place.
I agree with everything you say. I have written numerous times on CP this very same idea. "The stock buyback. Analysts love it. That is great when we have a full pipeline. When we are contracting it's a short term fix. It's saying there is no where better to put the money." In addition the stock buyback is a gimmick demonstrating that the EC doesn't have any better ideas for investing in the business. I also pointed out that reissuing of debt is a stop gap measure that only prolongs the inevitable failure that comes from not knowing how to invest existing resources to promote growth. I do want to make a stab at your last question. The market for this new class of drugs has the potential to be very big. I have written before on these boards that cancer is a disease that will be treated with drug combinations. It is inevitable. To move fast and not be left behind Merck needs to partner with other players to get these combinations in trials quickly. Merck lacks the resources and talent to develop these drugs in a timely manner and the competition is not waiting for them to do so. Analysts predict $35B market and everyone is scrambling to capture their share. Merck is incapable of going it alone to be as successful as they need to keep this company from imploding. I still question whether being a major player in this therapeutic area will be enough to keep this behemoth afloat. The short term injection of revenue derived from these products will not make up for the tremendous loss in pipeline development outside of oncology and the idea of purchasing a late stage pipeline some point in the future is simply a fantasy promoted by the finance neophytes that live in a world of wishful thinking. http://www.bloomberg.com/news/2014-05-29/immune-therapy-s-cancer-promise-creates-research-rush.html?cmpid=yhoo
You make some interesting points. Management at all levels are just waiting around to see how long this gravy train will last. Don't expect some breakout idea from the EC.
