Merck & Co. (MRK) is a very serious player in the global pharmaceuticals arena. How serious? Well, their current market cap is over $59 billion. Their 2007 financials indicate total revenue of over $24 billion, and an incredible $4.8 billion on research & development.
Merck’s pharmaceutical segment offers an incredible array of products treating everything from asthma to prostate enlargement. Their vaccines segment also offers a wide range of products including pediatric, adolescent, and adult vaccines aimed at preventing chickenpox, measles, mumps, rubella, and even some cancers.
Of course a common knock on pharmaceutical makers is that profits drop as products come off patent and generic competition is introduced. Merck, like any pharmaceutical maker is susceptible in this respect.
Merck also shares some strong points with other pharmaceutical makers. First is simply that not everything comes off patent at once. Merck is somewhat protected by its broad product line. Another positive factor is that $4.8 billion spent on R&D. Sure, it won’t all pay off–but some of it will. Finally, let’s not forget the baby boom and their almost certain increasing reliance on healthcare spending.
Today Merck closed trading at $28.12, at a PE of about 13.5, and a yield of 5.3%. Does Merck deserve a spot in your portfolio?
Uncategorized, health care
Merck, MRK, pharmaceuticals
Pfizer (PFE) develops and markets medicines for humans and animals worldwide. Some of its be
st-known products for humans include Lipitor, Norvasc, Caduet, Lyrica, Aricept, Zoloft, Celebrex, Viagra, Detrol, and Zyrtec. Mind you, they make even more products for humans, and an impressive array in their animal health division.
It’s true that health care in the U.S. faces some strong headwinds. Government regulations make getting a drug to market incredibly time-consuming and expensive. Lawsuits can be incredibly damaging to sales, reputation, and stock prices. And of course the recession can’t help.
They’ve got some strong tailwinds too though. They spend massively on research and development. Sure that hurts in the short-term, but the benefits can be huge in the long-term. Also remember that Pfizer is an incredible marketing machine–and that’s on a worldwide basis. How much more medicine will China and India consume as their wealth increases? Finally, we have the demographics of the U.S. population. I think we can count on increasing use of medicines here in the U.S.
Now a lot of that is forward looking, and therefore perhaps in question. What is not in question is that at a current price of $16.65, Pfizer has an indicated yield of 7.6%. A yield like that should make the wait for a turnaround in share price less painful. What do you think?
Update 1/30/09
Dividend cut makes the Dividend Guy say it’s time to bail. What do you think?
health care
health care, PFE, Pfizer, pharmaceuticals