), one of the world's top pharmaceutical houses, like an ailing tech outfit. Its shares have skidded from 100 in 2000 to 57 on Mar. 27. Flat earnings and a perception that its pipeline is almost empty have dampened interest. And recent worries over two major drugs--painkiller Vioxx and second-generation anti-arthritis drug Arcoxia--have added to investors worries.
But now, some value players think Merck is a compelling buy. Before long, investors will view Merck as a "premier drugmaker trading at a significant discount," says John Maloney, who heads M&R Capital Management, a New York hedge fund. Based on his estimated 2002 earnings of $3.15 a share, the stock trades at a price-earnings ratio of 18, vs. 25 for Pfizer and 22 for the Standard & Poor's 500-stock index, notes Maloney, who has accumulated Merck shares. The money pro says that Merck, which spends billions on research, has several new drugs coming up that will be huge sellers, such as oral medicine for depression, and compounds for treating diabetes and AIDS. Recent reports linking Vioxx to 10 cases of aseptic meningitis are still "inconclusive," he says, and they haven't changed his stance on Merck. He sees the stock rising to 75 in two years. Merck's stock fell from 63 to 59 on Mar. 15, when the company pulled its new-drug application for Arcoxia from the Food & Drug Administration, so that it could resubmit with additional efficacy data--to broaden the drug's use for chronic pain caused by inflammation of the spine. Analyst Charles Butler of Lehman Brothers says this was a smart move. He expects Merck to refile by the end of the second quarter and launch Arcoxia in 2003's second period. He retains his 2003 earnings figure of $3.53 a share and strong-buy rating. By Gene Marcial