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Merck: As Stock Gets Upgrade Is Vioxx Coming Back?

In very early trading MRK shares are rallying this morning on the wings of an upgrade at Cowen & Co. by analyst Steve Scala from Neutral to Outperform. He's been at a Neutral since a year and one month ago when the stock was sitting in the 30s. Today it's in the low 50s.

So, why upgrade now? Scala, who is one of those analysts who does not do TV interviews, writes in the research note to clients, "Merck's business momentum is readily apparent, key existing products are performing well, and its novel pipeline is poised to generate news in H2 (the second half of this year). Based on this assessment, we are upgrading MRK...." Scala or someone on his team is long on MRK.

A SECOND LIFE FOR VIOXX?
But could investors be bullish on more than just Merck's drug development pipeline? Could the company someday bring Vioxx back to market? That's the question raised over the weekend by a front-page "Business Sunday" article in the Newark Star-Ledger headlined, "Love letters to Vioxx." The paper operates in the shadows of The New York Times and The Wall Street Journal, but because New Jersey is considered to be the medicine chest for the world--with several major pharmaceutical companies either headquartered or with major operations in the state--the Star-Ledger has at least a few reporters assigned to the beat, including Ed Silverman who has been broken off to blog full-time about the industry at www.pharmalot.

Arguably, I think the Star-Ledgerprovides some of the best sector coverage around. The article includes excerpts of letters patients wrote to Merck about how well Vioxx worked for them. And it reiterates that Merck still has not shut the door on the possibility of selling Vioxx again. Remember, this was a company-initiated voluntary recall. The FDA never ordered the drug withdrawn and a subsequent Advisory Committee did not recommend that Vioxx should be barred from returning to market. Over the years, I've heard several anecdotes from co-workers, friends and family who say they or people they know feel that Vioxx is the only drug that helped them and that they'd be willing to take it again, knowing full well the heart risks it carries.

On the other hand, I suspect that if Merck made serious overtures about bringing Vioxx back that the FDA would give it another thorough review and that in the current safety-conscious--some say ultra-conservative environment, it might have a tough time winning a ringing agency or advisory panel endorsement.

Questions? Comments? Pharma@cnbc.com