Merck & Co. (MRK) has room to fall

Merck & Co., Inc.  (Public, NYSE:MRK) shares have fallen from $60 to $37 all since the start of 2008.  Today's 10% drop came after the FDA denied approval of a their new cholesterol drug, Cordaptive. The questions investors want to know is how much further will shares fall and can they recover any time soon?

Merck's Vytorin cholesterol drug recently failed trails, the Vioxx mess, what's next?

The majority of the analysts on the Street believe the rejection raises doubts whether the FDA would be willing to approve another potentially lucrative Merck drug, now in development, that combines Cordaptive with Merck's older Zocor cholesterol fighter.

Citibank analyst George Grofik had predicted $1.4 billion in U.S. sales for Merck's experimental niacin-based cholesterol treatments, but on Tuesday stripped all the potential sales from his Merck forecast.

Consequently, Grofik cut his Merck per-share profit forecast to $3.59 in 2009 and $4.01 in 2010, from his earlier projections of $3.62 and $4.12, respectively.

Although Grofik noted it was "still theoretically possible" Cordaptive could be approved before data from long-term trials, now expected in 2011, he said Merck's attractiveness is now "less compelling."

Even so, he maintained his "buy" rating on the company, citing its lowered share valuation, 4 percent dividend yield and favorable sales-growth prospects for existing products -- including its Gardasil vaccine against the virus that causes cervical cancer.

The six month chart shows no hope for Merck's in the short term:

Fellow Masters, Merck is has much to prove to investors before their stock bounces back.  The FDA is holding all their cards and that doesn't play well for Merck because in the end, the house always wins.  Use caution if you are looking for a botton in Merck shares, we believe they could continue to fall another 5 to 8% in the next few months. Once the stock hits bottom take a position and cash in on the dividend while you wait for the stock to recover, but be patient.

SOURCE: Reuters.com