Drug powerhouse Merck (NYSE: MRK) has been trading near its 52-week lows recently, partly because of flat earnings growth expectations for 2002.

In 2002, Merck is expected to be rocked by the loss of revenue as the patent protection for some leading drugs - such as cholesterol drug Mevacor and hypertension medication Prinivil - expires.

Further complicating the picture is that most of the recent growth in Merck's revenues is attributed to subsidiary Merck-Medco, the nation's largest pharmacy benefits management company. Merck-Medco's business has much lower profit margins than the branded drug operations, so Merck's overall profit margins as a percentage of sales shrink while Merck-Medco's sales increase. This makes Merck look bad when compared with other major drug companies that stick to their high-profit pharmaceutical knitting.

Lest investors forget, however, Merck and the other major pharmaceutical firms have long been stock market stalwarts, and Merck's lowered expectations for 2002 are affecting the prices of other Big Pharma players, too.

Merck has recently traded at a price-to-earnings ratio below 20, with a dividend yield above 2 percent. If it can survive this transition year and return to double-digit growth in 2003, as its management contends, investors may be looking at an opportunity to snag one of the most respected names in business at a good discount to the S&P; 500.