FIN 560 Securities Analysis Project
MERCK & CO.
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ABSTRACT
The purpose of this paper is to research, analyze and whether to recommend Merck & Co. to potential investors. I will be using both qualitative and quantitative analysis based on previous years of data for the company. I will provide efficient background information (life cycle analysis) including a brief history of Merck & Co., it’s stock chart since being added to the market, any advantages or disadvantages it has within its industry and important news that may affect a potential investor’s willingness to buy or sell this stock.
I will provide data and information regarding the Return on Equity (ROE), which shows growth of the stock. I will also provide a projected future growth rate of earnings, its rate of return and valuation techniques.
In conclusion, I will recommend a buy or sell option and a target price based on all analysis and data provided.
THE INDUSTRY AND OUTLOOK
Competitive forces in the pharmaceutical industry:
Monopolistic competitive
One of the fastest growing industries (healthcare and pharmaceuticals)
A lot of generic brand competition, but this can be combated with discount coupons
Multiple companies that produce drugs
No one company has control of the industry
Most companies don’t compete directly on price for new drugs. This is usually done through the insurance companies
Entry barriers can be difficult because of costs of resources and technology, R&D, getting patents.
Company News (previous and current):
Lawsuits
Possible restructuring
R&D issues
Cost cutting
Joint ventures & deals
Positive Outlook:
Merck is a well-run company with advanced in-house R&D capabilities. Although the company is not completely admonished from faltering performances by its competitors, many believe this offsets any setbacks from strong sales of new product approvals like Victrelis as well as cost- cutting efforts.
________________________________________________________________________
ABSTRACT
The purpose of this paper is to research, analyze and whether to recommend Merck & Co. to potential investors. I will be using both qualitative and quantitative analysis based on previous years of data for the company. I will provide efficient background information (life cycle analysis) including a brief history of Merck & Co., it’s stock chart since being added to the market, any advantages or disadvantages it has within its industry and important news that may affect a potential investor’s willingness to buy or sell this stock.
I will provide data and information regarding the Return on Equity (ROE), which shows growth of the stock. I will also provide a projected future growth rate of earnings, its rate of return and valuation techniques.
In conclusion, I will recommend a buy or sell option and a target price based on all analysis and data provided.
THE INDUSTRY AND OUTLOOK
Competitive forces in the pharmaceutical industry:
Monopolistic competitive
One of the fastest growing industries (healthcare and pharmaceuticals)
A lot of generic brand competition, but this can be combated with discount coupons
Multiple companies that produce drugs
No one company has control of the industry
Most companies don’t compete directly on price for new drugs. This is usually done through the insurance companies
Entry barriers can be difficult because of costs of resources and technology, R&D, getting patents.
Company News (previous and current):
Lawsuits
Possible restructuring
R&D issues
Cost cutting
Joint ventures & deals
Positive Outlook:
Merck is a well-run company with advanced in-house R&D capabilities. Although the company is not completely admonished from faltering performances by its competitors, many believe this offsets any setbacks from strong sales of new product approvals like Victrelis as well as cost- cutting efforts.
References: 1. Blake, Hannah. “A history of Merck & Co”. Pharmaphorum. May 30, 2013. Retrieved from http://www.pharmaphorum.com/articles/a-history-of-merck-co 2. “Economics Committee Newsletter”. Cornerstone. Retrieved from http://www.cornerstone.com/getattachment/5f41372f-11ac-4f45-9f27-45b1dad16444/Analyzing-Pharmaceutical-Industry-Competition.aspx 3. “Investors”. Merck.com. Retrieved from http://www.merck.com/investors/financial-reports/home.html 4. Lowe, Derek. “A Call For Merck To Cut R&D”. Seeking Alpha. August 21, 2013. Retrieved from http://seekingalpha.com/article/1649562-a-call-for-merck-to-cut-r-d?source=yahoo 5. Silverman, Ed. “Does Merck Need A Major Restructuring”. Forbes. August 20, 2013. Retrieved from http://www.forbes.com/sites/edsilverman/2013/08/20/does-merck-need-a-major-restructuring/?partner=yahootix 6. Zvi Bodie. Essentials of Investments, 8th Edition. McGraw-Hill Learning Solutions, 2010. .