Merck's revenues were light, but market reaction was positive. Eli Lilly's earnings were up sharply, but still disappointed the Street. So how does an investor play the results? Last week, Barbara Ryan of Deutsche Bank was looking for a "buy" in Merck and a "hold" in Eli Lilly, a call that was right on the money. On Monday, she offered CNBC her pharma insights and picks.
Why did Merck meet expectations with soft revenues?
"When we look at the major products that Merck sells, and what's really important to its future, those did very, very well," Ryan told CNBC. "From that perspective, we're not concerned about the revenues."
Merck was also able to survive problems with Vytorin and Zetia, the cholesterol drugs that are part of its joint venture with Schering-Plough . Ryan says those problems are more likely to impact Schering-Plough.
"Merck is predicting that profits in that joint venture, which were about $2 billion each for Merck and Schering-Plough last year, are going to be down $700+ million this year," she said.
Ryan is also downbeat about Wyeth .
"They...are dealing with a fair amount of generic competition, notably for their ulcer drug Protonix, so that will put pressure on their business," she said.
In addition to Merck, she recommends Pfizer and Bristol-Myers.
"Bristol-Myers...is going to benefit from strength in their existing product portfolio, as well as a major restructuring initiative," she explained.
Ryan does not personally own Merck shares, but her firm does. Deutsche Bank also owns Eli Lilly shares, Lilly is an investment banking client, and Deutsche Bank has received non-investment banking related compensation from Eli Lilly within the past year.