During regular trading hours on Tuesday, Merck shares hit 60 bucks. If you bought the stock about two years ago and held it, you've doubled your money. Merck traded for 45 bucks and change the day before the company recalled Vioxx. It hadn't been above 60 since mid-2003. This has to go down as one of the greatest comeback stories in history.
After Merck pulled the painkiller off the market and tens of thousands of people sued the company some said the lawyers were going to own Merck and that the drugmaker would have to liquidate or, at least, Merck would ultimately have to pay tens of billions of dollars to make the lawsuits go away. (Earlier this month, Merck reached a nearly $5 billion settlement agreement on most of the cases.)
But Merck had a few aces in its pocket--a handful of new vaccines, most notably the one for cervical cancer, Gardasil, and a new diabetes drug, Januvia, which is now marketed in two forms. It also got rid of its CEO and the new CEO, Dick Clark, grabbed the bull by the horns and, like many other big drug companies, simultaneously and aggressively cut costs.
The recent run-up in the stock began with the Vioxx deal and has continued with what could be a flight-to-quality, defensive play in the recent volatile, down market. But it could also be due to investors positioning themselves ahead of two potential catalysts for the stock.
Next Tuesday, before the opening bell, Merck will hold a conference call/web cast to update its financial guidance. And then the following week it will hold its annual analyst meeting to update its drug development pipeline. Among analysts there is disagreement about if the two events or to what degree they might spur the stock even higher.
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