The Zacks Analyst Blog Highlights: Merck, GlaxoSmithKline, VIVUS, Santarus and Celgene

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Apr 30, 2013, 09:30 ET

CHICAGO, April 30, 2013 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Merck & Co. Inc. (NYSE:MRK), GlaxoSmithKline (NYSE:GSK), VIVUS Inc. (Nasdaq:VVUS), Santarus, Inc. (Nasdaq:SNTS) and Celgene Corporation (Nasdaq:CELG).

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Here are highlights from Monday's Analyst Blog:

Merck Likely to Beat Earnings

We expect Merck & Co. Inc. (NYSE:MRK) to beat earnings expectations when it reports first-quarter 2013 results before the opening bell on May 1, 2013.

Why a Likely Positive Surprise?

Our proven model shows that Merck has the right combination of two key ingredients to beat earnings.

Positive Zacks ESP: The earnings Expected Surprise Prediction (ESP) (Read: Zacks Earnings ESP: A Better Method) for Merck is +1.28% – the difference between the Most Accurate earnings estimate of 79 cents per share and the Zacks Consensus Estimate of 78 per share. This indicates a likely positive earnings surprise.

Zacks Rank #3 (Hold): Merck carries a Zacks Rank #3. Note that stocks with Zacks Rank of #1, #2 and #3 have a significantly higher chance of beating earnings. The Sell rated stocks (#4 and #5) should never be considered while going into an earnings announcement.

The combination of its Zacks Rank and Earnings ESP for Merck makes us confident of a positive earnings surprise in the to-be-reported quarter.

Drivers of Better-than-Expected Earnings

While headwinds remain in the form of the Singulair genericization, EU pricing pressure, unfavorable currency movement, US health care reform and pipeline setbacks, some of the company's recent launches should start contributing significantly to the top line in the first quarter.

Products that should add significantly to revenues include hepatitis C virus (HCV) drug Victrelis, fertility drug Elonva, Saphris (acute treatment of schizophrenia and bipolar I disorder in adults), Simponi (treatment of certain inflammatory diseases), Dulera (asthma), and Daxas (chronic obstructive pulmonary disease) among others. Additionally we believe Merck's Januvia (sitagliptin) for type-II diabetes should continue to benefit from regulatory restrictions imposed on competitor GlaxoSmithKline's (NYSE:GSK) Avandia.

This company has delivered positive earnings surprises in the last four quarters with an average beat of 2.66%. We expect the trend to continue.

Other Stocks to Consider

Merck is not the only company looking up this earnings season. Here are some other stocks you may want to consider as our model shows these have the right combination of elements to post an earnings beat this season:

VIVUS Inc. (Nasdaq:VVUS) has an earnings ESP of +7.84% and holds a Zacks Rank #3.

Santarus, Inc. (Nasdaq:SNTS) has an earnings ESP of +8.33% and holds a Zacks Rank #3.

CHMP in Favor of Celgene's Revlimid

Good news flowed in at Celgene Corporation (Nasdaq:CELG) from Europe when the Committee for Human Medicinal Products (CHMP) of the European Medicines Agency (EMA) recommended the approval of its cancer drug Revlimid in the EU for the myelodysplastic syndrome (MDS) indication. The positive opinion by the CHMP will be reviewed by the European Commission, which should issue a final decision in two to three months.

Celgene is seeking EU approval for the use of Revlimid for treating patients with transfusion-dependent anemia due to low or intermediate-1-risk MDS associated with an isolated deletion 5q cytogenetic abnormality. The patients did not respond adequately to other therapies for the disease.

The CHMP issued the positive opinion on the basis of encouraging data from the phase III MDS-004 study (n=205). The study, conducted across multiple European centers, evaluated the efficacy and safety of Revlimid versus placebo.

We note that Revlimid, the principal growth driver at Celgene, is already approved for the MDS indication in many countries including the US, Canada, Switzerland, Australia, New Zealand, Malaysia, and Israel apart from several Latin American nations. The drug is also approved in many countries across the globe in combination with dexamethasone for treating multiple myeloma patients who have received at least one prior therapy. Approval in the EU for the MDS indication would further boost the sales potential of Revlimid.

Apart from Revlimid, the oncology portfolio at Celgene includes drugs such as Vidaza, Abraxane, Pomalyst and Thalomid. Celgene also boasts of an interesting and diversified pipeline. A number of pipeline-related news is expected in the coming quarters. We believe that the successful development and commercialization of the pipeline would boost Celgene's top line further.

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