Merck shares fall after analyst rumor over Zetia

TRENTON, N.J. - Speculation over why a researcher halted a study pitting a cholesterol drug sold by Merck & Co. and Schering-Plough Corp. against a drug made by Abbott Laboratories Inc. led to a big drop in Merck shares Thursday.

Shares of the Whitehouse Station, N.J.-based drugmaker fell as much as 5.1 percent and were down 3.7 percent at $27.01 in late-afternoon trading. Shares of Kenilworth, N.J.-based Schering-Plough fell, but not quite as sharply, and were down 2.7 percent at $24.59 in late trading.

At least one analyst warned clients that the reaction was overblown.

Meanwhile, shares of Abbott, based in Abbott Park, Ill., were down slightly — 0.9 percent at $45.89.

The Merck sell-off followed a report from an analyst at research firm Natixis Bleichroeder, which lowered its rating on Merck from "Buy" to "Hold" after seeing a media report about the early end of a study.

The study compared Abbott's niacin-based cholesterol treatment, Niaspan, with Zetia. Partners Merck and Schering-Plough jointly sell both Zetia and a second cholesterol drug, Vytorin, both of which have seen sales slump since January 2008, due to two other studies questioning their effectiveness and safety.

About 400 patients getting one of the two treatments were being followed, through imaging and other tests, to see which group had more plaque buildup in neck arteries over 14 months. The patients also were taking a second cholesterol drug from the class called statins.

A posting on a National Institutes of Health Web site that provides details on medical studies, ClinicalTrials.gov, said an independent steering committee "has stopped the trial based on results of a pre-specified, blinded interim analysis. It was not stopped due to safety concerns."

That notice was posted on June 16 but was not publicized until The Wall Street Journal reported on it Wednesday evening.

On Thursday, the Natixis report speculated the trial was stopped early because Niaspan was found to control cholesterol levels better than Zetia.

The posting on ClinicalTrials.gov gives no such details. Abbott, which provided free once-a-day Niaspan and some other funding for the study, has not been given a reason by the principal investigator, said company spokeswoman Elizabeth Hoff.

That investigator, Dr. Allen J. Taylor, who initiated the study, on Thursday declined to give any details, but said study results would be disclosed after they had undergone peer review. Normally, study results are reported at a medical conference or published in a medical journal after such vetting, typically many months after a study ends.

"We're following the traditional process to ensure the scientific integrity of the information," Taylor said.

Deutsche Bank analyst Barbara Ryan, writing to clients on Thursday, said the negative reaction by Merck investors was "premature."

"Any substantial weakness in (Merck) shares today on this development is unwarranted, in our view, based on the available information," Ryan wrote.

She added she expects sales of Zetia and Vytorin "to continue to bleed market share, from currently already very low levels."

Their sales totaled $4.6 billion last year, down from $5.2 billion in 2007.

Niaspan, which has been on the market since 1997, had sales of $786 million last year, making it Abbott's No. 6 drug by sales.

Merck, which is acquiring Schering-Plough for $41.1 billion, said late Thursday that it did not know why the study was halted.

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