Vytorin Battle Pits Merck/Schering-Plough Vs Pfizer

Given investor reaction to the Vytorin/Zetia news yesterday, you might draw the conclusion the huge cholesterol drug franchise might be doomed.

Sure, analysts say, prescriptions and sales are gonna go down some more, but they're not going to zero. The drug may not have been effective as had been hoped against a key heart disease measure, but it did lower bad cholesterol, triglycerides and a marker for heart attack risk more than Zocor alone.

And MRK and SGP are already trying to promote that fact. Check out the two-page ad the companies took out in today's USA Today sports section. (The first page is the true ad, the second page is all the fine print on the label about side effects and stuff.)

What I think is most notable about the message is that they come right out with it--and in boldface type, no less: "VYTORIN has not been shown to reduce heart attacks or strokes more than Zocor alone."

On the flip side Pfizer has taken out a big ad in the Newark Star-Ledger (most of the large drug companies have major operations or their HQ in Jersey and tens of thousands of employees live there) for the past couple days. The copy says: "Now you know. There's an important difference between Vytorin, Zetia, and Lipitor. Unlike Vytorin and Zetia, Lipitor is FDA-approved to reduce the risk of heart attacks, strokes...."

And now even the editorial cartoonists are jumping into the fray. Today's Star-Ledger opinion page features this little gem on Vytorin: "Take twice a day for no good reason. Side effects: falling stock prices, reduced executive bonuses, uncontrollable CEO weeping, job loss."

But in all seriousness, the Vytorin/Zetia aftermath may not be Schering's only challenge. There's a slew of analyst commentary and at least a couple of upgrades on Vertex Pharmaceuticals this morning.

What does that have to do with SGP? Well, the companies are racing to get new drugs approved for hepatitis c and based on new data many analysts are saying it looks like VRTX's drug might be better than they thought it was and possibly better than Schering's.

In an exclusive interview with Jim Cramer on "Mad Money" last night SGP CEO Fred Hassansaid, "This is a broad, strong company."

Its strength is certainly being put to the test.

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