Take a look — from Business Week:
. . . .The company faces generic competition in two years to drugs that generate a quarter of its $46 billion in annual sales, including its top-selling drug, asthma treatment Singulair. Merck’s best hopes to replace those drugs years away from hitting the market.
When Frazier announced the $8.5 billion research bet, Merck shares fell 2.7 percent. That’s because research dollars spent today can take a decade to turn profits. Development of a new drug can cost as much as $1.3 billion. The cost is particularly high for the cholesterol pills, diabetes medicines, and vaccines that distinguish Merck’s pipeline because they may be widely used and require more rigorous testing. The potential payoff, though, can be huge. Pfizer’s cholesterol-lowering Lipitor, the world’s best-selling drug, generated $10.7 billion in sales last year. “As CEO, I have the responsibility to make sure we make smart bets,” says Frazier. . . .
After taking a $1.7 billion write-down on vorapaxar, Frazier also withdrew Merck’s 2013 earnings target, saying the company wouldn’t be able to meet that forecast without shortchanging investments in researchsomething he’s unwilling to do. Merck’s compound with the most profit potential, a cholesterol pill called anacetrapib, remains on track. The drug raised so-called good cholesterol by an unprecedented 138 percent and reduced bad levels by 40 percent in a late-stage study released in November, positioning it as a possible successor to Lipitor. Results from final tests are years away. Explains Frazier: “If you’re going to be in the business of breakthrough research, you have to accept that the timing can be uncertain and the risks are large. . . .”