Pharmas Market with Mike Huckman

Merck And Big Pharma: Both Getting A Stock "Booster" Shot?


Merck this morning announced that it has filed for Food and Drug Administration approval of its blockbuster cervical cancer vaccine, Gardasil, for women 27-45 years old. Right now it's approved for females 9-26.

The additional filing was expected. The news is that the FDA has put it on a fast track. That means it could be approved for that age group in six months or so. Next up: the company could file for approval of the shots for young men and boys. Merck gets further and further ahead of GlaxoSmithKline , which is still waiting for the FDA to approve its similar vaccine, Cervarix, for girls and young women.

Gardasil is one reason Deutsche Bank big pharma analyst Barbara Ryan is reiterating her "Buy" rating on MRK in a research note to clients this morning. She says the controversial Vytorin study and the bear market have overpunished shares of the Dow component and that several catalysts lie ahead to spur the stock, including growing sales of Gardasil. Ryan argues that a combination of near-term events "could drive a meaningful recovery in MRK's shares in late April/early May."

But her bullish call is not limited to MRK. Ryan titles a separate note to clients today, "Historic Lows May Set Tone for NT (near-term) Rally". Again, the bear market and a rotation out of the traditionally defensive pharma sector, she says, have taken "relative drug stock valuations back to their historic lows, during the '93-'94 HillBilly HealthScare."

That's her term to describe the old Clinton healthcare reform proposal. "We believe that the group could trade up 5-10 percent versus the market," Ryan writes. She bases her thesis on cost cuts driving profit growth in pharma, the weak dollar boosting the top and bottom line and the drug companies being relatively recession-proof when it comes to earnings expectations.

Deutsche Bank makes a market in Merck, Pfizer, Schering-Plough, Bristol-Myers Squibb, Wyeth and Eli Lilly and owns at least one percent of the shares in all of those companies. In addition, it wants to do investment banking for PFE, WYE, and BMY and has banked and wants to do it again for LLY.


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