Wednesday, July 10, 2013

Merck Looking to Sunburns for Growth

Given research setbacks and the known quantity that its melanoma therapy lambrolizumab is unlikely to receive approval prior to 2015, merger and acquisition activity will be critical to Merck’s (MRK-$47.96) pipeline expansion strategy and subsequent sales growth objectives in the next decade. Though the company has ample liquidity – with $16 billion in available cash and short term investments, free cash flow of $8.2 billion (trailing twelve months), and manageable debt–to-equity ratio of 0.31 times – some $6 billion in debt will need to be refinanced through 2015. Additionally, as Merck is looking to keep investors happy with its $1.72 per share dividend and an expanded stock buyback program, the company is unlikely to get involved in a premium bidding war for the likes of an Onyx. 

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.