Merck and Eli Lilly Maintain Analyst Ratings

Analysts have a one-day respite between two major pharma R & D days and they're using it to size up Merck's (MRK) update Tuesday and to set expectations for Eli Lilly's (LLY) briefing today. Again, I'll be at the Lilly 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 yesterday morning he wrote, "We believe that although a case can be made for owning MRK based on mid-single-digit EPS growth prospects through '11 & an attractive 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 Merck is still a "Buy." She wrote, "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 (GILD). 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 (IMCL) 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 told clients yesterday.

And Fernandez at Leerink Swann also has a "Market Perform" rating on LLY. He wrote, "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.