CORRECTED: Merck shares jump on strong profit, raised forecast

(Corrects to “second-quarter” from “first-quarter” in 1st paragraph)

By Bill Berkrot and Ransdell Pierson

NEW YORK (Reuters) - Drugmakers Merck & Co. (MRK.N) and Schering-Plough Corp. (SGP.N) reported second-quarter results that handily topped Wall Street expectations on Monday, helped by increased sales of the cholesterol-lowering drugs they co-market and other medicines.

Merck, whose results were also spurred by soaring vaccine sales, really gave investors something to cheer about when it boosted its 2007 earnings forecast 25 cents per share and significantly raised the outlook for sales of several of its drugs, sending its stock up more than 8 percent.

For vaccines alone -- including Gardasil, the first vaccine to protect against cervical cancer -- Merck raised its sales forecast for the year by $600 million to between $3.9 billion and $4.3 billion.

By comparison, Johnson & Johnson (JNJ.N) and Swiss drugmaker Novartis (NOVN.VX) recently lowered their 2007 sales forecasts, while some analysts were skeptical that Pfizer Inc. (PFE.N) could meet its modest sales targets for the year.

Merck shares, which closed in on $53, have doubled since the dark days following the 2004 withdrawal of its former blockbuster arthritis drug Vioxx, when many investors and industry observers believed that the venerable company's best days were behind it.

Deutsche Bank analyst Barbara Ryan said Merck is the shining star of the pharmaceutical industry and called its performance post-Vioxx "a home run."

"It is the company with the best earnings visibility through the end of the decade," Ryan said. "Things just continue to be better than we expect."

Second-quarter net income rose to $1.68 billion, or 77 cents per share, from $1.5 billion, or 69 cents per share, a year earlier. Excluding special items, Merck earned 82 cents per share, beating analysts' average expectations by 10 cents, according to Reuters Estimates.

Helped by cost controls and growing demand for the Zetia and Vytorin cholesterol drugs it shares with Merck, Schering-Plough profit more than doubled to $517 million, or 34 cents per share from $237 million, or 16 cents a share.

Excluding items, Schering-Plough earned 41 cents per share, beating analyst expectations by 6 cents per share.

Including revenue from its joint venture with Merck, sales jumped 15 percent to $3.8 billion. Zetia and Vytorin brought in $1.2 billion in the quarter, up 30 percent from a year ago.

Sales of other major cholesterol drugs, including Pfizer's top-selling Lipitor, have been falling since generic forms of Merck's Zocor flooded the market last year.

Schering-Plough said sales of arthritis drug Remicade, which it sells outside the United States, soared 28 percent in the second quarter to $394 million, while sales of allergy treatment Nasonex jumped 22 percent to $295 million.

Morgan Stanley analyst Jami Rubin said Merck's new 2007 forecast of $3 to $3.10 per share for earnings excluding items "gives us all the more confidence that management will indeed be able to hit (or beat) their 2010 target of $4."