Table of Contents 2
Overview of Merck & Co Inc.3
Timeline of Important Milestones5
External Factor Evaluation (EFE) Matrix9
Financial Ratio Analysis13
Company and Industry Performance14
Internal Factor Evaluation (IFE) Matrix17
Grand Strategy Matrix24
The Internal-External (IE) Matrix26
Balanced Score Card (Figure 1)28
EPS / EBIT Analysis36
Overview of Merck & Co Inc.
Merck and Company Inc. was incorporated in New Jersey and trades on the New York Stock Exchange (NYSE: MRK). It is a research-driven pharmaceutical company that discovers, develops, manufactures and markets a broad range of products used to improve consumer and animal health, generating sales of $27.4 billion with an operating profit of $2.4 billion as December 31, 2009. Headquartered in Whitehouse Station, N.J., Merck provides its products through wholesale, retail drug and food chain, and mass merchandiser outlets in the United States and worldwide. In addition, the company has production facilities for its human health products at locations in the United States, Puerto Rico, as well as plants in Australia, Canada, Japan, Singapore, South Africa and other countries in Western Europe, Central and South America, and Asia. The company operates in three segments: the pharmaceutical, animal health and consumer healthcare segments. The Pharmaceutical segment provides human health pharmaceutical products, such as therapeutic and preventive agents for the treatment of human disorders in various areas across the body. The Animal Health segment offers antibiotics, anti-inflammatory products, vaccines, products for the treatment of fertility disorders, and parasiticides for cattle, swine, horses, poultry, dogs, cats, salmons, and fishes. The Consumer Health Care segment provides over-the-counter products, including antihistamines, products for constipation, cold/flu medicines, nasal decongestant sprays, and laxative tablets among others. Among Merck’s major brands are Singulair, Fosamax, Zocor, Gardasil and Varivax. In its drug manufacturer industry, Merck’s major competitors are Johnson & Johnson, Pfizer, Novartis, GlaxoSmithKline as well as other smaller companies. In terms of market capitalization, Johnson & Johnson leads the industry at $162.9 billion, while Merck ranks 4th at $106.7 billion
Based on analysis of Merck’s dividend growth rate the stock is priced above its valuation. However, due to concerns about Merck’s drug pipeline, revenue growth, and generic competition already being reflected in its current stock price, the stock is rated a hold. Further, Merck’s low P/E and attractive yield relative to the industry and S&P 500 provide investors with a margin of safety while waiting for an improvement in the drug pipeline.
Merck is the third largest manufacturer of human healthcare pharmaceuticals. Merck sells its products to drug wholesalers, retailers, hospitals, government agencies, and managed care providers. The company’s products address drug therapies to treat atherosclerosis (Zocor), hypertension / heart failure (Cozaar, Hyzaar, and Vasotec), anti-inflammatory / analgesics (Vioxx, Arcoxia), osteoporosis (Fosamax), asthma / allergy (Singulair), pediatric vaccines, anti-bacterial / anti-fungal, and HIV. Merck’s dedication to research is stated in its mission statement and demonstrated. Merck currently sells 23 drugs developed through their R&D efforts. Source: Merck Annual Report
Merck was started in 1887 when German chemist Theodore Weicker came to the...