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MRK, SGP: Big Pharma Healthier This Monday

Monday, 23 Jul 2007 | 12:38 PM ET

After a disappointing week for big pharma earnings, Merck and Schering-Plough start the second-half of the sector's reporting season with a bang. Both companies beat the Street on the top and bottom lines. Merck also raised its full-year earnings guidance to boot. And investors love it. Look at the huge move in the Dow component.

The two companies benefitted by strong growth (30%) in sales of their joint venture cholesterol drugs Zetia and Vytorin. But Merck, in particular, has a lot more going on. Despite all of the sociopolitical controversy over its new cervical cancer vaccine, revenue from Gardasil rose to nearly $360 million. That puts it on track to possibly become a billion-dollar blockbuster product in its first full year on the market. The company is boosting its full-year sales forecast for all of its vaccines by $600 million.

And then there's the new diabetes drug Januvia. MRK sold $144 million dollars worth of the pill in the second quarter. That's up from $87 million in the previous quarter. Clearly, it's off to a strong start and is seeing upside from the safety scare with GlaxoSmithKline's Avandia.

Another potential beneficiary of that could be Amylin Pharmaceuticals' Byetta. AMLN reports earnings after the bell today. David Kliff, an insulin-dependent diabetic who writes a newsletter called, "The Diabetic Investor", writes in a note to subscribers this morning, "When it comes to lucky streaks Januvia from Merck wins the golden horseshoe award. This (the Avandia/Actos) situation has left Januvia standing alone as the only oral Type 2 (diabetes) medication free from major side effects.

Add in the fact that Merck has an army of sales reps promoting the drug and you have the makings of a blockbuster." Kliff has previously expressed skepticism about Januvia's potential and has raised questions about its side-effect profile.

P.S. In my post on Friday, I inadvertently left Amgen off the earnings calendar. The biotech giant reports after the bell this Thursday. Investors will be watching to see how much damage has been done to the company's anemia drug franchise in the wake of safety and reimbursement issues. Those products account for about half of AMGN's profits.

Questions? Comments? Pharma@cnbc.com

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