) has brought in a new top scientist to shake up its research and
Roger Perlmutter, former top scientist atAmgen (
), told analysts late last year he plans "major surgery" on the
drugmaker's research operation, cutting dead-end projects, and
focusing its laboratories on biotech and cancer medicines. He
said there's too much red tape and not enough risk taking.
Merck has been criticized for being too cautious as rivals
have moved into biotech and away from primary care medicines.
Merck's top-selling drug is Januvia, used to treat diabetes.
Another top drug, Singulair, treats asthma.
The company has a long history. It traces its origins to
apothecary Jacob Friedrick Merck, who acquired the Angel Pharmacy
in Darmstadt, Germany, in 1668. In 1887, it opened a U.S. branch
and 10 years later opened a pharmacy in Manhattan that became
During World War I, the U.S. branch of the company was seized
by the government and it supplied medical supplies to the U.S.
military. After the war, Merck's U.S. branch became an
Right now, drugmakers are hot commodities on Wall Street. As
of Wednesday's IBD, the Medical-Ethical Drugs industry group was
ranked No. 4 out of 197 groups. But most of the group's action is
driven by smaller and faster-growing biotech companies.
Merck has been a slow grower. Its five-year annualized growth
rate is just 3%, but it has an Earnings Stability Factor of 5 on
a 0 to 99 scale, where low numbers correspond to steady
It pays a dividend of 44 cents a share quarterly, which works
out to a 3.4% annual yield. The three- to five-year dividend
growth rate is 3%, which means it hasn't been growing very
Analysts expect an 8% EPS slowdown in 2013 and an additional
1% slowdown in 2014.