While The Street’s research (do go read it all — beginning on page 3) is thoroughly-vetted, and well-sourced — I don’t buy the conclusion, primarily because the metrics examined, while accurately-reported, are. . . incomplete.
In short, I think Merck was right to divest Medco — with my more complete explanation below the pull-quote:
. . . .It meant that by the time of the [Medco] spin, 63% of overall [Merck] revenue came from Medco. However, low Medco profit margins dragged on Merck’s overall share pricess, leading to a radical shift in strategy.
After the spin, which gave shareholders one Medco share for every eight Merck shares, their stock prices and earnings abilities diverged. Medco’s shares have gained over 500% since its Aug. 2003 initial public offering, while Merck’s shares have fallen by nearly a quarter. As a result, even with Medco’s subsequent stock gain, Merck shareholders have seen losses since the spin, when excluding dividend payments. . . .
Since the spin, Medco’s sales are expected to have nearly doubled to $68.5 billion, while profits are expected to triple to $1.5 billion according to 2011 earnings estimates compiled by Bloomberg. Meanwhile, Merck sales have grown at the same rate, while profits have doubled, on the heels of big merger activity. . . .
[Then, for a variety of reasons,] Merck pulled the trigger on one of the biggest mergers in pharma history buying Schering-Plough for $41.3 billion in May 2009. . . .
However, with it came legal battles. In 2009, Merck and Schering-Plough settled a suit for cholesterol treatment Vytorin after allegations of withholding key clinical trial results. Merck also pleaded guilty to a criminal charge with the U.S. Department of Justice for its marketing of painkiller Vioxx before it was pulled in 2004.
In July 2011, Express Scripts announced a deal to buy Medco Health Solutions (MHS) for $29 billion in a deal to combine two of the largest pharmacy benefits managers in the U.S. However, the deal is facing antitrust scrutiny, which jeopardizes its outcome. . . .
All of the above is accurate, but the price performance disparity post-Merck’s 2003 divestiture is, in my opinion, less a “short-sighted divestiture” example (the authors’ thesis), and more a story about the overall decline of branded pharma margins, globally – on the Merck side.
More directly, as the upper right graphic reminds us, and these stories (here, and here) document, the Medco relationship was fraught with conflicts of interest — especially for a pure pharma with the visibility, scale and size of Merck. It ultimately put the company in the position of being a competitor to its customers. That will almost never work (longer term), and often leads to investigations, and scandals (as we’ve seen here).
A nice piece, just the same. Almost as if to undercut the authors’ thesis, from their own concluding sentence on the topic (above), the ongoing anti-trust scrutiny of the pending Express Scripts/Medco tie-up would suggest that Merck was (again) right to hand this value package back to shareholders. Of course, “your mileage may vary” — in fact, it probably does.













SOPA And PIPA: Crushed By The “Tubes” — Yes Schering-Plough, Your Corporate Logos Have Always Been Subject To “Fair Use” Rules
Clearly, that right belongs to the people — in our first amendment jurisprudence. As you can see (with just a casual glance around the place), my commentary touches on matters of significant public concern, and in doing so, makes liberal use of carefully-modified — but still plainly identifiable — corporate identity intellectual property. That is plainly my first amendment right. Thus, for 24 hours through this morning, this site carried the masthead banner at right, in solidarity — click to enlarge.
While I think the issue is largely decided, it is nice to know that no one will have to litigate the above issue, to establish this freeedom, for the rest of us — after yesterday. Per The New York Times, this morning:
One ancillary point I’ve not seen others make yet is this:
After Citizens United (the Super-PAC-enabling Supreme Court decision) was handed-down, and corporations were effectively handed affirmative, full-fledged first amendment political influencing rights, a logical and necessary implication will be that the same corporations must now also live by the limits of the first amendment jurisprudence, as well: these very-public “people” (business entities) must fairly be subject to commentary and criticism, even couched as fact rather than opinion — without a right to complain at law — except in the limited circumstance of “actual malice” falsity, or “reckless disregard” factual errors.
Buckle-up, and pucker-up, ole’ Buttercup.
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Tagged SOPA PIPA Defeated Wikipedia Google Blackout Protest "Fair Use" Commentary on Brands Trademarks Logos Tradenames January 18 2012