When Getting Beat Down Is No Big Deal

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There isn't much to like about big pharma these days. Beyond the substantial dividends -- that will hopefully be around in a few years -- it's hard to get excited about their growth potential over the next few years.

But the bulk that drag downs the growth has its advantages, too.

For instance, Merck (NYS: MRK) is getting smacked down by Vertex Pharmaceuticals (NAS: VRTX) in the hepatitis C market. In the first full quarter after their U.S. launch, Vertex's Incivek sold $420 million while Merck managed just $31 million for Victrelis.

If it was the other way around, Vertex would be crushed -- just look at Dendreon's (NAS: DNDN) lackluster launch of Provenge. But Merck isn't dependent on just one drug; the pharma has at least 11 drugs on pace to become a blockbuster this year. Sure, it would be nice for Victrelis to be a blockbuster, but the long-term health of Merck just isn't that dependent on it.

At this point, investors should be focused on Januvia and its combination brother, Janumet. The diabetes drugs rose 41% and 42%, respectively, in the third quarter, helping Merck boost its overall sales by 8% in the third quarter.

The company recently gained approval of a second combo product, Juvisync, which unites the active ingredient in Januvia with Merck's longtime generic statin, Zocor. I don't know if adding a cholesterol-lowering drug will really convert patients that are already on other diabetes medications like Takeda's Actos or Onglyza from Bristol-Myers Squibb (NYS: BMY) and AstraZeneca (NYS: AZN) , but it might help recruit new diabetics to the Januvia family. Generic Zocor is the second most prescribed drug in the U.S., so doctors may give Juvisync to patients that already take generic Zocor to eliminate the extra pill they'd have to take with another diabetes treatment.

Another blockbuster certainly would be nice. It's clear it won't come from Victrelis, but a combination hepatitis C pill isn't out of the question. Merck and Rochehooked up earlier this year, agreeing to combine their medications to develop a combination drug.

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At the time this article was published Fool contributor Brian Orelli holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Dendreon. Motley Fool newsletter services have recommended buying shares of Vertex Pharmaceuticals. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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