No Shutdown for the Markets as the Dow Runs Higher

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

The government shutdown hasn't bothered investors one bit today as stocks have hit their stride. The Dow Jones Industrial Average has shaken off yesterday's drop to rise into the green, and as of 2:15 p.m. EDT, the blue-chip index has run up gains of more than 50 points. Most stocks are in the green, but Merck has led all risers on the Dow so far today. Let's catch up on what you need to know.

Merck making moves
Merck hit a high for shareholders today as the stock has risen 2.4%. Big Pharma's big days usually come from drug approvals, but not today: Instead, Merck pleased investors with the announcement of a major overhaul of its research and development unit that the company said will eliminate 8,500 workers and save an estimated $1 billion per year.

Some shareholders have clamored for a shake-up in the research and development department for years. Merck's division took up a significant slice of its sales in 2012 Overall, the company's R&D expenditures last year amounted to more than 17.2% of its total revenue. That was significantly more than major rival Pfizer , which spent only about 13.3% of its total revenue on R&D.

Even worse for Merck, all that spending has paid off in disappointment lately. The company's promising osteoporosis drug odanacatib hit a snag when Merck delayed its FDA filing from this year to next earlier in 2013. Odanacatib is estimated to reach $1 billion or more in annual peak sales, so the delay hit particularly hard for investors expecting the drug to help make up lost sales from the patent cliff. Merck's also felt the blow of regulators rejecting its drugs recently: The Food and Drug Administration turned back the company's surgical anesthesia drug sugammadex in September. Even though sugammadex wasn't expected to be a significant revenue driver for the company, it was another piece of Merck's future and R&D spending that couldn't come to fruition.

The company's sales have been hit hard by the patent cliff, and though Merck's stock has jumped 19% year to date, it is on shaky ground until its pipeline begins paying off. Today's shake-up will help keep costs down and hopefully propel earnings higher until Merck's revenue turns around.

Pfizer, though it hasn't seen the same sort of year-to-date gains as Merck's stock, has firmed up its drug portfolio much more strongly with some promising products. Pfizer's Lyrica, already on pace to sell more than $2 billion, has helped ease the pain of the patent expiration of former top seller Lipitor, while strong up-and-comers Xalkori and Eliquis are poised for bright futures. The stock's up 0.4% today, part of a 17.5% gain in 2013.

Pfizer has had its share of stumbles as well due to the patent cliff, but the company's robust pipeline - one of the largest in Big Pharma - looks to provide for this stock for years to come.

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