Merck shares rose sharply after the drugmaker raised its outlook for first-quarter and full-year earnings, citing strong sales across its range of products, and said a federal court judge dismissed a class-action securities lawsuit against the company.
Merck said it now expects to earn 84 cents a share in the first quarter, excluding restructuring charges, compared with a prior projection of 63 cents to 67 cents a share provided in February. Merck shares broke above $50 a share for the first time since Oct. 9, 2003 -- a year before Vioxx was taken off the market.
For the full-year, Merck raised its forecast to a range of $2.75 to $2.85 a share from a range of $2.55 to $2.65 a share. Both forecasts excluded charges.
Analysts, on average, had expected an adjusted profit of 64 cents a share in the first quarter and $2.66 a share for the full year, according to Reuters Estimates.
Merck, of Whitehouse Station, N.J., said its updated forecast does not reflect additional reserves for liability related to litigation involving the company's recalled arthritis drug Vioxx.
Goldman Sachs pharmaceutical analyst James Kelly upgraded the stock to "neutral" from "sell," citing "revenue strength beyond our view."
"Management's significant increase in quarterly and full-year guidance reflects continued
execution across the board," Kelly wrote in a client note released Friday morning. "We had based our sell rating on the difficulties overcoming the patent expiries and Merck has handled this in a superior manner to other industry participants."
In February, the company said sales of its new diabetes drug Januvia and its Gardasil vaccine against cervical cancer were helping to boost 2007 earnings.
Including restructuring charges, Merck said it expects to earn 78 cents a share in the first quarter and between $2.60 and $2.75 a share for the full year.
Judge Cites Time Restrictions In Suit
Separately, Merck said a federal judge in New Jersey has dismissed "with prejudice" a consolidated securities class action filed by investors against the company in connection with disclosures regarding the withdrawn painkiller Vioxx.
The company said Judge Stanley Chesler of the U.S. District Court in Newark found that the securities action should be dismissed "because all of the plaintiffs' claims were time-barred under the applicable statutes of limitations."
Merck has been swamped by lawsuits since its 2004 withdrawal of Vioxx. The drug was linked to a higher risk of stroke and heart attack when compared with dummy pills.
Vioxx is a type of of nonsteroidal anti-inflammatory drug called a Cox-2 inhibitor, developed to be gentler on the stomach.
More than 27,000 personal injury lawsuits alleging harm from Vioxx have prompted regulators to view Cox-2 inhibitors with suspicion.
Arcoxia Is Rejected by FDA Panel
Merck had hoped to introduce Arcoxia as a successor to Vioxx, but the painkiller was rejected by a federal health advisory panel on Thursday after the market closed.
A Food and Drug Administration drug safety expert earlier told the panel that the drug may increase substantially the risk of stroke and heart attack and is no more effective for pain relief than other medicines in the same class.
"What you're talking about is a potential public health disaster," Dr. David Graham told the outside experts before the vote. Graham was a leading critic of Vioxx, a related drug also known as rofecoxib.
"We could have a replay of what we had with rofecoxib," Graham said.
The FDA is not required to follow the recommendations of its advisory committees, but the agency usually does. Merck hopes the FDA will make a final decision by month's end.
Arcoxia is the first drug of its class to go before the FDA for approval since Merck withdrew Vioxx.
"We at Merck believe etoricoxib represents a valuable treatment option for patients with osteoarthritis. We would like to emphasize there is more long-term safety data" for etoricoxib than there is for any other nonsteroidal anti-inflammatory drugs, or NSAIDs, said Peter Kim, president of Merck's research laboratories.
An estimated 21 million people in the United States suffer from osteoarthritis. NSAIDs are a common treatment. Arcoxia and Vioxx are types of NSAIDs called Cox-2 inhibitors, developed to be gentler on the stomach.
The only Cox-2 inhibitor still sold in the United States is Pfizer's Celebrex. The New York company withdrew another of the drugs, Bextra, in 2005.
Merck said the cardiovascular risk of Arcoxia was comparable to another older NSAID, diclofenac, based on the results of a study that enrolled nearly 35,000 patients. Arcoxia causes more high blood pressure than the older drug.
Graham, the FDA drug safety expert, and other critics believe it would have been more fair to compare other NSAIDs, such as naproxen, sold as Aleve and under other names. They contend diclofenac raises heart risks; Merck disputes that.
Diclofenac is widely used worldwide. In the U.S., however, it accounts for just 5% of the market for prescription NSAIDs.
Based on smaller and shorter studies, Merck said the cardiovascular risk of Arcoxia was consistent with that posed by other NSAIDs, but greater than that posed by naproxen. The company sells Arcoxia in 63 other countries.
In the U.S., the safety of Cox-2 inhibitors has drawn scrutiny from regulators, drug companies, academics, lawmakers, advocacy groups and the media in the wake of Vioxx's withdrawal.
Graham told a Senate committee in 2004 that the FDA had fumbled its handling of Vioxx and mishandled safety problems with five other widely used drugs.