UPDATE 1-Spain halts batch of Merck's Gardasil

(Adds company, analyst comment in paragraphs 5-7)

MADRID, Feb 10 (Reuters) - Spain's Health Ministry has ordered hospitals and chemists to temporarily halt the use of a batch of cervical cancer vaccine Gardasil, produced by drugmaker Merck & Co MRK.N, after two girls became ill after a shot.

Spain’s health ministry said health services would continue to administer shots of the vaccine but ordered that the use of batch NH52670 be suspended after health authorities in Valencia region reported on Feb. 6 that two girls had become ill after receiving the injection.

Merck markets the vaccine in Europe with Sanofi-Aventis SA SASY.PA. It competes with GlaxoSmithKline Plc's GSK.L rival product Cervarix.

Both vaccines are designed to be given to girls and young women to protect against cancer-causing strains of the sexually transmitted human papillomavirus (HPV).

Sanofi Pasteur MSD, the Sanofi-Merck partnership that sells Gardasil in Europe, said it and health authorities were investigating what happened, but it added that an adverse event after vaccination did not mean the vaccination had caused it. “In both cases, other medical conditions (in the girls) have been observed and are being investigated which could be the cause of the reported events,” said Sanofi Pasteur MSD, adding that 40 million doses of Gardasil had been distributed worldwide since its launch in 2006, without showing evidence of concerns.

Simon Mather, analyst at bank WestLB, told clients the news was mildly positive for Glaxo, though in any case, Glaxo’s Cervarix shot had been chosen in 80 percent of recent tenders.

“Although millions of doses have been administered worldwide without any side effects, it could strengthen Glaxo’s claims for winning future tender bids with its rival cervical vaccine Cervarix if it transpires that batches or Gardasil are found to be contaminated,” he said in a note.

According to the health ministry, 76,000 shots from the affected batch have already been distributed to regional authorities and chemists, who have been told to halt its sale.

On Feb 3, Merck reported a 16 percent decline in quarterly sales of Gardasil and cut its expectation for the product’s sales this year [ID:nN034901126]. (Reporting by Raquel Castillo; translating by Ben Harding, editing by Will Waterman)