Merck shares way down, Schering recovering

Merck shares plunged by more than 11 percent Tuesday, or $4, to $31.33. More than 56 million shares, three times normal volume, changed hands Monday.

Schering-Plough's shares rose 5.1 percent, or 96 cents, to end at $19.91. The company saw nearly 109 million shares, or seven times normal trading volume, change hands on Monday, when the stock dropped by 11.6 percent.

That was after European researchers presented results of a study called SEAS that found Vytorin, which combines Merck's Zocor and Schering-Plough's Zetia, didn't prevent deterioration, surgery or death in patients with diseased heart valves, as hoped. Study patients on the drug also had far more cancers and cancer deaths than those taking a placebo; the researchers said evidence indicated that was a fluke.

Due to the news, Kenilworth, N.J.-based Schering-Plough and Whitehouse Station, N.J.-based Merck delayed release of their second-quarter results from Monday morning until after the market closed.

The two drugmakers once heavily advertised Vytorin--with the ubiquitous "Food and Family" TV ads--and Zetia. The pills brought their cholesteroljoint venture $5.1 billion in 2007 sales. But sales have fallen about 25 percent since January, when another study showed $100-a-month Vytorin was no better at preventing plaque buildup than Zocor alone, available as a cheap generic.

On Tuesday, a report from Goldman Sachs analyst James Kelly noted the second-quarter revenues Merck reported, $6.05 billion, were below his expectation, as were operating results. He noted Merck withdrew its forecast for long-term earnings per-share and for its 2008 income from the joint venture.

"Before this quarterly report, we had expressed concern with 2008 guidance and double-digit earnings growth (Merck has been forecasting) through 2010," Kelly wrote, adding, "the softness of the base business lowers our estimates further." He cut his earnings per share forecast for 2008 through 2012 by 2 cents this year and 18 cents in 2008.

But Kelly said he thinks Schering-Plough remains strong because of its animal health drugs, Remicade for immune disorders, synergies from its fall acquisition of Organon BioSciences and a pipeline "robust relative to peers." He raised his earnings-per-share forecast by 2-3 cents a share through 2012.