European drugmakers - FT.com Developing drugs can be all-or-nothing. To see how the sharp edge of that proposition feels, look no further than UCB and Merck. Over the past five years, Germany's Merck has lost investors 9 per cent, and Belgium's UCB 26 per cent. By comparison, the Eurofirst 300 pharmaceuticals index has added 14 per cent. In keeping with that trend, UCB has reported a 5 per cent fall in earnings per share excluding one-offs for 2011. And now that its epilepsy drug Keppra - which brought in €1bn last year, or almost one-third of revenues - has lost exclusivity for most uses, 2012 could be even worse. This year the drug's European sales could fall by a half. That would wipe some 10 per cent off UCB's top line. Merck, meanwhile, has just announced a restructuring drive. The company had pinned its hopes on Cladribine, a multiple sclerosis pill. But inadequate test results meant that the project was cancelled last year. So as a result of what chief executive Karl-Ludwig Kley calls "market shifts," Merck will not issue an outlook statement for 2012. And this week's 2011 results presentation will probably not be glowing. In the first nine months of 2011, Merck's earnings per share fell 18 per cent compared with the prior year. Yet despite both companies" uncertainty, Merck still trades at 11 times expected earnings - in line with its peers. And UCB trades at over half as much again. That can be partly explained by the Belgian company's better growth potential - a fifth of its revenues are generated by drugs that are growing at a double digit rate. At Merck the proportion is only 4 per cent, similar to some other mature drugmakers. That makes its valuation look expensive and means a punt on its shares is more of a bet that management can streamline the company without cutting the wrong costs, so killing future growth. Investors may be best off waiting until that overhaul actually happens.