WASHINGTON, Feb. 28 (UPI) -- Merck Wednesday boosted its 2007 earnings forecast above Wall Street's expectations, sending its shares rising in early trading.
The pharmaceutical giant attributed the increase "to early revenue trends across the company's range of products," but did not identify any specific brand names or provide any details about the trends.
Merck raised its first-quarter earnings-per-share guidance to $0.63 to $0.67, beating Wall Street's consensus forecast of $0.60.
Merck also raised its full-year 2007 EPS guidance to $2.55 to $2.65 from its previous guidance of $2.51-$2.59. The new range included the Street's consensus estimate of $2.62.
Lehman Brothers analyst Tony Butler said one reason for the guidance increase is the delay in approval of Novartis' diabetes medication Galvus, which leaves the DPP-IV inhibitor area open for Merck's drug Januvia.
"We view this as a clear positive but are not surprised by this upward revision given the further delay in approval of competing oral diabetes drug Galvus (Novartis) and potential market exclusivity in the DPP-IV class of diabetes drugs for potentially the next 18 months," Butler stated in a research report.
Novartis said last week the Food and Drug Administration requested additional clinical data on the safety of Galvus, which could delay the launch of the drug until mid-2008 or later. The general feeling among analysts was that the drug would ultimately win approval.
Merck spokeswoman Amy Rose told United Press International the company was not providing any details about specific products that were driving the increased forecast.
"We didn't provide any specifics other than it is exactly that: early positive performance trends that we're seeing on a variety of products throughout our portfolio," Rose said.
She said the new guidance could not be attributed solely to Januvia, but that the drug's potential is included in their overall forecast for the year. In Merck's fourth-quarter 2006 report in January, the company's 2007 guidance for a category called "other products," which includes Januvia, was for $5.2 billion to $5.6 billion.
Rose said the revised guidance consisted of changes only to the top-line and did not include reconfigurations for the forecasts of any specific elements.
Butler said Merck's pipeline, particularly in the HIV area, also looks strong and could serve as a catalyst for the stock later this year.
"We view Merck's strategy for MK-0518 as a sound one," Butler stated. "The need for treatment-resistance HIV infection still remains high, and with a benign toxicity and safety profile, could provide a nice entry for the first integrase inhibitor into the HIV antiviral market in the treatment-experienced setting."
Merck has previously said it expects to file a new drug application for MK-0518 in treatment-experienced patients in the second quarter of this year. The FDA has fast tracked the drug and Butler said he thinks it's likely the agency would grant it priority review.
If MK-0518 does win approval for treatment-experienced patients, Butler said Merck would probably follow up with a sNDA for treatment-naive patients later in the year. A phase 3 trial for this indication is already on-going.
MK-0518's use in the treatment-naive setting could also be a positive for Gilead's integrase inhibitor GS-9137.
"If GS-9137 could demonstrate phase 2 data with efficacy/safety profile similar to those of MK-0518, it could be a potent addition to this class of antiretroviral inhibitors with potentially improved once-a-day dosing," Butler stated.
He forecasts that MK-0518 and GS-9137 could generate peak sales of more than $800 million.
Lehman Brothers did not respond to UPI's request for comment from Butler.
Goldman Sachs analyst James Kelly noted Merck's new full-year guidance included his estimate of $2.61, but the company's first-quarter forecast beat his estimate of $0.60.
"Shares should react positively to the increase in guidance, though the consensus estimate implies that the market had already assumed that 2007 results would be above the company's previous guidance," Kelly stated in a research report.
Kelly, who rates the stock as "neutral," said his estimates are under review.
Goldman Sachs told UPI Kelly was unavailable for comment.
Merck noted that the revised guidance "does not reflect the establishment of any reserves for any potential liability relating to the Vioxx litigation."
The pending Vioxx litigation will continue to haunt the company this year. Merck still faces more than 46,000 Vioxx plaintiffs, and some analysts estimate the company's liability will reach as much as $15 billion.
Merck shares were up 2.4 percent to $44.20 in late-day trade Wednesday.
