Double Blow For Merck

LONDON -- The ambitions of German drug company Merck KGaA have been crushed. An EU review panel dealt a body blow to Merck's dreams to extend the range of patients for its most promising cancer drug, following weaker than expected second-quarter results.Shares of Merck, which shouldn't be confused with the U.S. company of the same name, fell 14%, or 10.29 euros ($14.62), to 63.14 euros ($89.70) in afternoon trading in Frankfurt, easing up after having dropped more than 16% earlier in the session to their lowest level in two months.A scientific committee of the European Medicines Agency recommended that lung cancer drug Erbitux, which the company sees as a potential blockbuster, should not be used to treat lung tumors. The firm said it was considering appealing the agency's decision and that it didn't share its strategy for the development of the drug, but was not more specific.Also on Friday, Merck missed market expectations for earnings. The drug company, which is also the world's largest supplier of the key chemicals used in television and computer screens, posted a 48% drop in net profit, partly due to investments in its own research and development and one-time effects from the acquisition of biotechnology company Serono, Merck said.Instant downgrades on the stock followed the two pieces of news. UBS downgraded Merck to "neutral" from "buy" and it also cut Merck's earnings per share forecast by 7% for 2010 and 12% for 2011. Meanwhile, JPMorgan cut its recommendation to "underweight" from "neutral" and said investors may focus on other risks for the drug. Separately, UniCredit lowered its rating to "hold" from "buy." Contrary to rivals GlaxoSmithKline and Roche, which reported earnings this week, Merck won't be able to pin its hopes of better earnings to the sale of swine flu treatments. (See ...
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