FIN-516 – WEEK 2 – MINI – CASE
Merck & Co., Inc. by M. Luisa Ribeiro 1. Merck & Co., Inc. is a company in the Pharmaceutical Sector.
The headquarters are in Whitehouse Station, NJ but it has global presence providing prescription pharmaceuticals, animal health, and consumer care, which include animal health, consumer care products and pharmaceutical medicines which include vaccines, biologic therapies. Merck’s products are marketed directly and through joint ventures. 2. Merck’s operating risks:
Merck’s operating risks include recently expired and expiring patented medications which are and soon will be facing market competition from generics, and fewer that optimal products in the development stage to be brought to
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The Cost of Preferred Stock:
The company doesn’t have issued and outstanding Preferred stock 11. The cost of Equity:
Required rate of return on Equity (rE) Calculation : rE = rF + B ( rM + rF)
Assumption:
Risk Free rate, rF = 3.0%
Market rate, rM = 11% rE = 3.0% + .39 ( 11%-3%) rE = 3.0% + 0.39 x 8% = 3.0 + 3.12 = rE = 6.12
12. The cash dividend yield on the Common Stock Is
$0.432 per share paid quarterly 13. The Weighted Average Cost of Capital of the company is:
WACC = rD (1- Tc )*( D / V )+ rE *( E / V )
Tc= 27.9%
Total Debt: D= 19,042 billion
Total Equity: 3019.61Million Issued and Outstanding shares of Common Stock x $47.16
E=$142,404.98 Million
Value : V = 19,042 billion + 142,404.98 Million
V=161,446.98 billion
WACC = 3.75 (1-0.279)*( 19,042 / 161,446.98)+ 6.12 *( 142,404.98 / 161,446.98)=
=(2.70 * 0.12 ) + (6.12 * 0.88) =
WACC = 0.32+ 5.4 = 5.72
14. What is the Price Earnings Multiple of the company?
Price of a share per earning per share on December 31, 2012 :
$47.16 / ($6,165 M / 3,019.61M shares)= 23.10 15. How has the company’s stock been performing in the last 5 years?
Merck stock price has increased from $38.35/share on June 3, 2098 closing at 47.16 on May 24, 2013. The stock performance over the last five subsequent years has had significant fluctuation, trading at a low
Through this analysis, I would recommend Medco to remain as a separate subsidiary company operating under Merck. This will allow both companies to continue operating on their strengths. Merck will continue to focus on operations within the medical, clinical, and other areas while Medco will work on maintaining relationships with plan sponsors and other managed care organizations. This will allow each division to work and support the other.
Threats to Pfizer's competitive edge come primarily from the products that it offers. Celebrex faces challenges not from other competitors, but from challenges to its safety. Celebrex generates more than $3.3 billion for the company, and having the drug pulled from the market or restricted would have a significant effect on Pfizer's ability to compete. The
Technical risk, a large portion of all development costs are spent on drugs that never reach the market.
The second rests in Pfizer’s expiring patents on several popular drugs that invite their competitors to enter the market with similarly performing pharmaceuticals. Once these patents expire, Pfizer will either have to extend the patent through reformulating the performance of the drug for another purpose called “ever greening”, or abandon the line in the pursuit of another, more profitable product. Regardless of what they do in terms of their own product offerings, generic imitations of their products will enter the market, diluting the profitability of the drug and forcing reliance on the sales of other existing products to make up the loss.
While some have identified Merck as a visionary company dedicated to a "core values and a sense of purpose beyond just making money" (Collins & Porras, 2002, p. 48), others point out corporate misdeeds perpetrated by Merck (e.g., its role in establishing a dubious medical journal that republished articles favorable to Merck products) as contradictory
Merck is a drug manufacture giant who brings an annual revenue of nearly fifty billion. Prior the Vioxx recall Merck was a highly valued company when it came to its ethical standard. It had consistently toped list for companies to work for (Lawrence & Weber, 2014). In addition to this they were well recognized as a socially responsible company who placed an importance on testing to provide the best quality pharmaceuticals. The Vioxx recall caused a huge blow for the company resulting in lawsuits and drop in company value.
Merck is among one of the most successful drug companies, producing several top tier drugs for various health concerns and problems over the past couple of decades. Several aspects of influence and power come into their disposal to continue their success and market their products to the public. The power and influence they utilized had positive and negative effects on the company itself that caused ethical issues as they faced lawsuits and retraction of some of their drugs, such as with Vioxx. First, Merck had a lot of leverage with the amount of power that they obtained. Merck is a reputable drug researcher and producer.
Burroughs Wellcome is located in England. Their primary business is selling human healthcare products, prescription and nonprescription. The two main
Research and Development: Merck is a research-driven company that has a new research and development model incorporating its business strategy. Merck hopes to improve the success of is R&D and to reduce costs by focusing on therapeutic areas that have unmet medical needs, and scientific and commercial opportunity. It plans to develop products within these therapeutic areas that are highly valued by patients and doctors.
In application, people might view Merck’s duties in different ways. For example, one might argue that as a company Merck only has responsibilities to release effective and safe medications and to make a profit to stay in business. On the other hand, it could be argued that as a pharmaceutical company Merck has special obligations to follow leads (like ivermectin) because they may greatly benefit human beings or save lives despite being unprofitable.
Merck’s diverse product lines provide the company with a broad target customer base of doctors and any consumer in need of medication. Their
Merck was a manufacturer of fine chemicals in Germany, had only a small sales presence in the United States until the First World War. In 1917, the U.S. government seized the stock of all German-held subsidiaries, the Merck family and other investors bought back the company’s stock and incorporated as a U.S. firm with no ties to the German parent. Mergers and acquisitions with other small U.S. chemical firms followed, and scale economies, coupled with necessity, led to a large R&D push at Merck. By the start of World War II, Merck Research Labs (MRL) was the leading pharmaceutical research institution in the United States. Developments in vitamins, antibiotics, hormones made by Merck boosted its profitability and strengthened its position as leading drug researcher and manufacturer. Merck was seen as a science led company which made breakthrough drugs and theses drugs would sell themselves on its own merits. They had a research driven model which was highly successful in the beginning and their profits were at the top most levels in the industry. In the 1990s, operating profit margins as high as 40% were common among leading drug makers. By 2001, price competition and buyer demands exerted pressure on margins, but the return on human pharmaceuticals sales still exceeded 30%, more than double that of the average corporation in the S&P 500 Composite Stock Index. They were successful in attracting top scientific minds into the company to manufacture drugs
In the last several years, Merck’s individual R &D department has not been able to keep pace with declining revenues from existing products. It is only through Mergers and Acquisitions that Merck has supplemented this income.
The principle products are neurosciences type, which its largest selling product currently is Zyprexa for the treatment of schizophrenia, “bipolar mania and bipolar maintenance.” Recently in 2004 it released Cymbalta,
Merck and Co., Inc. was, in 1978, one of the biggest makers of physician endorsed sedates on the planet. Headquartered in Rahway, New Jersey, Merck followed its starting points to Germany in 1668 when Friedrich Jacob Merck obtained a pharmacist in the city of Darmstadt. More than three hundred years after the fact, Merck, having turned into an American firm, utilized more than 28,000 individuals and had operations everywhere throughout the world.