Merck Yesterday, Lilly Tomorrow

Analysts have a one-day respite between two major pharma R & D days and they're using it to size up Merck's update yesterday and to set expectations for Eli Lilly's briefing tomorrow. Again, I'll be at the LLY meeting in New York City where I'll have a live interview with CEO and soon-to-be Chairman John Lechleiter on "Squawk Box" shortly after 7 a.m. ET.

Seamus Fernandez at Leerink Swann is keeping his "Market Perform" rating on MRK. In a research note to clients this morning he writes, "We believe that although a case can be made for owning MRK based on mid-single-digit EPS growth prospects through '11 & an attractie dividend yield (6 percent-plus) we believe more aggressive in-licensing or M&A will be necessary to drive renewed interest heading into...(drug) patent expirations." Leerink may trade in MRK shares.

Barbara Ryan at Deutsche Bank says MRK is still a "Buy." She writes, "More shots on goal are becoming visible....(But) a major strategic acquisition would complement these efforts and smooth out a rocky transition period, in our view." In a recent research note, Ryan modeled a MRK purchase of Gilead Sciences . DB has banked MRK, makes a market in MRK and GILD and owns at least one percent of the shares in both.

And Steve Scala has an "Outperform" rating on MRK, but is a little ambivalent. "For investors seeking drug stock exposure, we believe MRK is a reasonable choice." Scala apparently owns MRK stock.

Looking ahead to Lilly
Chris Schott at JPMorgan who has an "Underweight" (euphemism for "Sell") rating on LLY writes in a reseach note to clients that he's hoping to hear from the company tomorrow if or when its experimental bloodthinner, Effient, will go before a Food and Drug Administration advisory committee. The drug was put on a fast-track for an FDA decision which has been twice delayed. JPM would like to do investment banking for LLY in the near future and worked for ImClone on its sale to LLY.

Miller Tabak healthcare analyst Les Funtleyder says, "We are not expecting much in the way of new information." He, too, is hoping to hear about the fate of Effient. "While the downside appears limited near-term so does the upside and continued macro overhangs keep us on the sidelines," Funtleyder tells clients today.

And Fernandez at Leerink Swann also has a "Market Perform" rating on LLY. He writes, "Given significant Medicare exposure, a lackluster Phase 3 pipeline, & limited visibility on the Phase 2 pipeline, we believe LLY shares are fairly valued at current levels." LS may trade in LLY shares.

When I last interviewed Lechleiter in October he called the stock price "ludicrous." Today, it's about three bucks below ludicrous.

Clark Correction
Tom Grady emailed to point out a "small error" I made in my Merck update post yesterday. Ken Frazier told me that MRK Chairman and CEO Dick Clark was the biggest Penn State fan on the planet. I assumed (yeah, I know that's a bad thing) he went to school there. I should've doublechecked Clark's bio first on the Merck web site. Brady set the record straight writing, "Dick Clark is a grad of Washington and Jefferson with a MBA from American U. I should know. I hired him over 30 years ago. Dick is a good man and if anyone can get Merck moving again, it's Dick Clark." I can't vouch for that, but his alma maters (not known as football powers, maybe lacrosse?) explain why he glommed onto Penn State for athletics fandom. Frazier is a PSU grad, however. 'SC is still gonna beat 'em.

Questions? Comments?