Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Speculating in Takeover Targets -- Ignore unavailable to you. Want to Upgrade?

To: richardred who wrote (1048)	4/1/2007 12:30:02 PM
From: richardred	Respond to of 7239

Analysis: Merck won't lose sleep over drug By STEVE MITCHELL WASHINGTON, March 29 (UPI) -- Merck ceased development of their insomnia treatment, gaboxadol, but analysts don't think the news will significantly impact the company. Bear Stearns analyst John Boris reiterated his "outperform" rating of the stock, saying the anticipated approval of Janumet later this week will help the company's diabetes products and Wall Street is overlooking an expected increase in Merck's vaccine sales. "Janumet provides an additional leg of growth for (Merck's) diabetes franchise," Boris stated in a research report issued Thursday. He forecasts Merck will derive more than 35 percent of franchise revenues from Janumet, which he anticipates will generate global sales of $2 billion in 2010. Boris said he expects Janumet to be approved before the end of the week, with Merck launching the drug in early April. Merck may also gain an underappreciated earnings leverage from its vaccine products. "The sales contribution from (Merck's) vaccine franchise that requires less SG&A is increasing from 8 percent in '06 to 27 percent in 2010," Boris projected. He estimated Merck's Gardasil and RotaTeq vaccines would achieve 2010 sales of $2.9 billion and $1 billion, respectively. The company's viral vaccines are expected to generate sales of $1 billion this year and $1.1 billion next year, he said. Boris increased his earnings per share estimates for Merck through 2010, saying he anticipates "a more favorable competitive dynamic on new products coupled with cost saving initiatives." Merck and its collaboration partner H. Lundbeck said Wednesday they were discontinuing gaboxadol and would not file a new drug application with the Food and Drug Administration or any other regulatory agencies for the compound, which was in phase 3 development. "Data from recently completed clinical studies suggest that the overall clinical profile for gaboxadol in insomnia does not support further development," Merck said in a statement. The company offered no further details. Merck's President Peter Kim said the company may work with Lundbeck on other projects in the future. "Although Merck will not be continuing with the clinical development program for gaboxadol for the treatment of insomnia, we remain committed to our neuroscience and sleep disorders research program," Kim said. "As part of that commitment, we also welcome the opportunity to engage in other joint development efforts with Lundbeck in the future." Goldman Sachs analyst James Kelly dropped his earning per share estimates for Merck but maintained his "neutral" rating of the stock. "We have removed gaboxadol from our Merck model, following today's announcement," Kelly stated in a research report, noting that he had forecast the drug would generate $575 million by 2011. His 2008 EPS estimate remained unchanged at $2.55, but declined slightly in 2010 and 2011 to $3.18 and $3.28, respectively. He maintained his 12-month price target of $43 for the stock and noted the discontinuation of gaboxadol may be a minor positive for Sepracor's Lunesta as it eliminates a potential competitor. However, David Amsellem of Friedman, Billings and Ramsey said the discontinuation of gaboxadol did not change much for Lunesta, which continues to face both immediate and long-term challenges. "We believe that the long-term competitive risks to Lunesta remain considerable," Amsellem stated in a research report. "There are several insomnia drugs in late-stage development that work differently than the GABA-acting agents and appear to carry lower safety and abuse risks," he noted. This includes Silenor's Somaxon, Vanda's VEC-162 and several other compounds other manufacturers are developing. "Additionally, we continue to believe that Lunesta sales in the near term are at risk, with the company's 2007 Lunesta guidance of $685 million not adequately reflecting the potential disruption to Lunesta sales due to the upcoming generic availability of (Sanofi aventis') Ambien," he added. Copyright 2007 by United Press International. All Rights Reserved. sciencedaily.com