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Prudential Cuts Merck Rating


According to a Wall Street Journal report, Merck (MRK) knew of Vioxx risks. Prudential downgraded its investment rating on the shares to neutral from overweight.

Analyst Tim Anderson says that since the Vioxx withdrawal, the Merck investment thesis has broken down. Although he still believes there's "value" in the company's pipeline over next 12 months or so, Anderson says this will likely get lost in negativism from ongoing Vioxx coverage. The other issue, says Anderson, is that not so well-appreciated new competition from Fosamax from GSK/Roche will be very instrumental in determining Street sentiment around Merck's potential liabilities. Also, he feels the consensus for 2005 EPS and beyond is too high. As a result, he downgraded the shares.


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