Merck & Company (NYSE: MRK) is currently one of the largest pharmaceutical companies in the world. Founded in New York, New York in 1891, Merck has risen to the top of the industry as a pioneer in healthcare innovation. The company’s stock trades at $38.52 per share as of January 28th, and it has a market capitalization of approximately $117.41 billion. Overall, Merck & Co. stock is a sound purchase for investors looking for a secure, consistently-earning stock. Since this time last year, the stock has gained $5 per share, and it currently pays a $1.68 (4.30%) dividend per year, meaning that it is a solid income stock that pays out nicely. On October 28th, 2011, the company hosted its third quarter earnings conference call. During the call, Kenneth C. Frazier, CEO, detailed the company’s positive growth during the 2011 year. “While we transitioned rights to Remicade and Simponi in certain countries this quarter, we were still able to drive 8% year-over-year growth in our overall business,” said Frazier (http://seekingalpha.com/article/307837-merck-co-inc-special-call).
During the company’s R&D business briefing in November, Frazier spoke about the company’s two-year anniversary of its merger with Schering-Plough. Schering-Plough, before being acquired by Merck & Company, had been one of the top twenty pharmaceutical companies in the United States (based on total sales). Frazier believes that the merger has gone smoothly and positively for both companies; in fact, he feels as if Merck and Schering-Plough are truly operating as one company. Since the merger, Merck & Company has achieved net synergies of $2.8 billion, a fact which Frazier explained is all the more impressive due to the company’s limited, targeted investments in 2011. Frazier demonstrated that the company has enjoyed notable financial success in the year 2011. Interestingly enough, one of those successful areas was the company’s animal health division. Frazier explained that animal health grew, for the company, by 20% in the third quarter alone; half of that growth was fueled by new products, showing that Merck & Company’s ability to develop new, top of the line products has carried it to financial prosperity. Looking ahead, the market for animal healthcare products is expected to grow 5% by 2017, meaning that companies that have a strong foothold in the industry, such as Merck & Co., will likely continue to thrive in the business and enjoy growth later on. For investors, this is yet another green light to encourage a stock purchase in Merck. During the November 10th conference call, Peter S. Kim, Vice President and President of Merck Laboratories, announced that Merck has 8 anticipated filings for 2012 and 2013 (http://seekingalpha.com/article/307837-merck-co-inc-special-call). These filings include drugs such as Bridion, a drug reversal of neuromuscular blockade, which is already approved in 68 countries. It is having a “substantial impact” on the process of anesthesia in Japan, according to Kim, and is expected to do well for Merck & Co. in the future. Another anticipated filing is V503, Merck’s vaccine for the prevention of certain HPV-associated cancers. V503 takes the fourth HPV type in Gardasil and adds the 5 new cancer-causing HPV types, therefore totaling the drug’s protection to 90% of HPV-associated cervical cancer causes. The vaccine’s final study is fully enrolled, meaning that the vaccine is well on its way to providing Merck & Company with yet another successful product.
To say that Merck & Company is able to hold its own against the competition would be a tremendous understatement. In the areas that Frazier has labeled as the “must-win” markets of the United States, China, and Japan, Merck is growing faster than its competitors. Still, the company faces stiff competition from GlaxoSmithKline (NYSE: GSK), which boasts a 4.80% dividend and a market capitalization of over $220 billion. GlaxoSmithKline reported a strong, confident quarter during its conference call on October 26th, 2011: the company’s vaccine sales were up 21% according to Simon Dingemans (GSK’s CFO) and GlaxoSmithKline’s cash flow was up GBP 2.3 billion, which Dingemans said is a “significant increase from last year (http://seekingalpha.com/article/302338-glaxosmithkline-plc-s-ceo-discusses-q3-2011-results-earnings-call-transcript).
Furthermore, Pfizer, Inc (NYSE: PFE)., is another pharmaceutical company that offers a 4% dividend on its stock, making it an attractive option to investors; however, in late November 2011, the company lost its patent exclusivity to Lipitor, causing the stock to dramatically dip (http://seekingalpha.com/article/322676-earnings-preview-for-pfizer-q4-2011). That being said, Pfizer shares were at a 52-week high of $21.48 as of January 27th, 2011, meaning that the company has had time to bounce back from the Lipitor situation and could improve its prospects for the future. Even with this competition, Merck & Company is still a strong option when one considers its enormous potential stemming from its new drugs, its dramatic increase in Animal Healthcare, and its high dividend.
Merck & Co. is a recommended buy for investors. Usually, a high dividend is a sign of a volatile, insecure stock; however, Merck has been around for quite some time and shows no signs of disappearing. The fact that the company can offer a 4.30& dividend while the company remains strong and grows is incredible. Investors should definitely consider purchasing this stock, as the company’s future is expected to be bright and prosperous.