On Friday, drugmaker Merck (click ticker for report: MRK) put up solid second quarter results. The firm’s constant-currency revenue advanced 5% from the same period a year ago, while non-GAAP earnings per share jumped 11% from last year’s quarter. Merck’s pharmaceuticals, animal health, and consumer care segments all contributed to expansion, and the firm witnessed global growth for Januvia (up 36%), Janument (28%), Victrelis, Isentress (up 18%), Gardasil (up 17%), and Zostavax. The company noted that it is on track for 6 major filings in 2012-2013 (including Suvorexant for insomnia and Odanacatib for osteoporosis), indicating that progress within its pipeline remains robust. Its non-GAAP earnings-per-share target for 2012 of $3.75 to $3.85 was reaffirmed. Though Merck will face patent expiration of blockbuster Singulair in the US in August 2012 and in major European markets in February 2013, we think its pipeline is filled with candidates to replace this revenue stream in coming years. Still, the ride will be bumpy, and we don’t think its current share price offers a sufficient margin of safety to initiate a position at this time.
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