FDA Panel Nixes Merck's Arcoxia; Shares Climb on Raised Guidance

An FDA advisory panel has voted 20-1 against approval of Arcoxia, an arthritis drug manufactured by Merck. The company's shares rose, however, on a higher-than-expected preliminary Q1 earnings report and an upward revision of full-year guidance. Arcoxia is a Cox-2 inhibitor, the class of drug to which Merck's withdrawn painkiller Vioxx belongs. Vioxx was taken out of circulation on concerns about cardiovascular risks, and the FDA panel believes Arcoxia is similarly risky. Merck said yesterday it had earned Q1 EPS of $0.78, exceeding its earlier $0.58-0.64 forecast (itself an upward revision of a prior estimate), on stronger drug sales across the board. Excluding costs, profit is now expected to come in at $0.84, well beyond Street forecasts of $0.64. Merck also raised its full-year EPS estimate to $2.75 -2.85 (excluding items) from $2.55-2.65. Analysts are forecasting $2.66 EPS. The new forecasts do not reflect reserves for potential Vioxx liability. The company's shares rose 3.9% to $48.19 in AH trading after the report. Merck will report Q1 results on April 19.

Sources: Wall Street Journal, Bloomberg, MarketWatch
Commentary: Merck High On New Drugs' Success; Shares Gain • HealthShares Founder: Buy Biotech Stocks and ETFs, Avoid Big Pharma • Where's the Money Flowing in Healthcare Stocks?
Stocks/ETFs to watch: Merck & Co., Inc. (MRK). Competitors: Bristol-Myers Squibb Co. (BMY), Pfizer Inc. (PFE), Sanofi-Aventis (SNY). ETFs: Pharmaceutical HOLDRs (PPH), PowerShares FTSE RAFI Health Care (PRFH), iShares Dow Jones US Pharmaceuticals (IHE)
Conference call transcripts: Q4 2006

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