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Over/Under on St. Merck
Old 08-22-2005, 08:06 PM   #1
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Over/Under on St. Merck

Continued tough times for a key player in my least loved corner of capitalism..a.k.a. "Big Pharma."* The trial jackals are all over this one and the feeding frenzy is just beginning.* *Don't think I want any part of a 14 PE stock with this kind of liability.* *Prescription drug use has dramatically increased in the U.S. over the last 10-12 yrs...are there other drugs with as yet unknown deleterious side effects that will set the trial lawyers aflutter?*

The big funds defended Merck today...46mm shares were sucked up with only a modest decline in the closing print.* I say it hits high teens by year end.* No, I'm not short the stock.....just wanted to see where this one fits with other ER folks risk tolerance.
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Re: Over/Under on St. Merck
Old 08-22-2005, 09:01 PM   #2
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Re: Over/Under on St. Merck

Too risky for the price and environment. I try to not to catch a falling knife. I try to wait for it to hit the floor.
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Re: Over/Under on St. Merck
Old 08-22-2005, 09:50 PM   #3
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Re: Over/Under on St. Merck

The stock may go back up to low $30s if Merck wins the appeal but may drop as the next round of lawsuits hits. Wait until the stock drop to the teens.
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Re: Over/Under on St. Merck
Old 08-23-2005, 06:39 AM   #4
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Re: Over/Under on St. Merck

The market consistently over-penaliizes stocks for lawsuit/regulatory risk, and I suspect that MRK is no exception. If you are inclined to buy pharma, I think PFE and possible MRK might be worth a look, simply because lawsuit messes are rarely as bad as they initially seem. Having said that, this is a sector I avoid because I know full well that I couldn't hope to be better than the next guy at figuring pharma companies out.
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Re: Over/Under on St. Merck
Old 08-23-2005, 09:23 AM   #5
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Re: Over/Under on St. Merck

If the price drops enough to make the dividend yield attractive and if Merck's overall financial pictures implies that the dividend is secure then I would be a buyer.

After Philip Morris (now Altria) was hit with the $100B+ judgement I bought a significant amount of the stock at $19. It is now just shy of $70 and is paying out $2.92 per share in dividends. That is a 15% yield on my intial investment. Even if the tobacco business goes to zero, the Altria holdings of Kraft Food are worth more than $19. Was this a risky bet at the time I made it? Yes. Would I take a similar risk with Merck if the circumstances look right? Yes.

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Re: Over/Under on St. Merck
Old 08-23-2005, 09:50 AM   #6
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Re: Over/Under on St. Merck

Grumpy--I'm really worried about the pill part. I see the pill companies streching too hard for profits, e.g. lieing about/covering up resultant symptoms: see latest judgment regarding Viox (sp?). The CNBC folks always keep saying things are ready to turn--soon. I think the pill companies' research have reached the point where simple cures are harder and harder to find with pills. It's starting to take a bombardment of multiple bombs to fix things--which create their own problems. Just a guess as to what's coming. I'm usually wrong. One thing Two things I know for sure: Wear pants, get lots of exercize. Plus, eat fresh veggies and watch your spelling.

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Re: Over/Under on St. Merck
Old 08-23-2005, 09:57 AM   #7
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Re: Over/Under on St. Merck

Quote:
Originally Posted by Apocalypse . . .um . . .SOON
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Re: Over/Under on St. Merck
Old 08-23-2005, 10:04 AM   #8
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Re: Over/Under on St. Merck

I think a lot of the litigation costs are already in the current stock price. When the inital withdrawl was made earlier this year the stock nosedived to account for the fines and legal fees. While it may still drop some due to the settlement, the actual amount they end up paying will be far less than the actual settlement figures. This will drag out for years and while it will put a drag on the stock price the company will continue to make money.
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Re: Over/Under on St. Merck
Old 08-23-2005, 11:14 AM   #9
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Re: Over/Under on St. Merck

I just don't think the time is now. Grumpy made an excellent reference to the big MO a few years back. Same thing could happen. If you buy at a low enough price MRK will just need to survive to make a nice ROI. MRK does have a big money vaccine coming to the market to treat HPV and it could easily replace a multi-bill drug.
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