Merck's Side Effects - Cordaptive

FOXBusiness

Pharmaceutical giant Merck saw its share price take a big hit on Tuesday after the Food and Drug Administration denied a key cholesterol drug.
The FDA denied Cordaptive, a cholesterol medicine that Merck had high expectations for, on Monday evening through a “not-approvable” letter. Neither the FDA nor Merck released an explanation for the denial, but the company did say it plans to submit additional information to the agency for further evaluation.
Merck attempted to quell shareholder anxiety by reiterating its 2008 earnings outlook and saying it still sees double-digit earnings growth through 2010.
"Merck's broad portfolio of medicines and vaccines, including eight productsin launch phase, enables us to weather challenges that come our way," Richard T. Clark, chairman, president and chief executive officer of Merck, said in a statement.
Still, the market was spooked by the Cordaptive news as shares of Merck plunged 10% on Tuesday. The stock has lost nearly 30% of its value year-to-date and was hit earlier this year with a setback for its Vytorin cholesterol drug. Merck is the worst-performing stock on the Dow in 2008.
Citing financial-services firm Raymond James, The Wall Street Journal reported Merck was relying on Cordaptive for $2 billion a year in revenue and hoped to package the drug with Zocor, another cholesterol drug.
An analyst at Lehman Brothers (LEH: 46.90, -0.62, -1.30%) lowered his price target to $53 from $58 on Merck on the FDA news. Still, that price target would represents a 28% increase from Merck’s closing price on Monday of $41.44. The analyst, Charles Butler, said the FDA rejection could stem from a low number of patients in clinical trials, meaning more research is needed on potential side effects of Cordaptive.

The Cordaptive developments have implications for other drug makers. Cowen & Co. said Schering-Plough (SGP: 18.82, +0.07, +0.37%) would likely benefit as its Vytorin could now face less competition but Eli Lilly (LLY: 48.22, -1.14, -2.30%) "could suffer" because its Effient drug could be viewed as having the same fate as Cordaptive.
According to Thomson Reuters, Credit Suisse (CS: 53.01, -2.90, -5.18%) raised its 2008 and 2009 forecast for Abbott Labs (ABT: 53.61, +2.00, +3.87%), predicting a larger market share for the drug maker's Niaspan and Simcor drugs