(MRK) Japanese Approval for Merck Products

Merck (MRK) recently announced that it received approval for three products in Japan. The Japanese Ministry of Health, Labour and Welfare (MHLW) approved Gardasil [human papillomavirus quadrivalent (Types 6, 11, 16 and 18) vaccine, recombinant], Zolinza (vorinostat) and Cubicin (daptomycin for injection) for use in Japan.

Gardasil gained approval for the prevention of cervical cancer (squamous cell cancer and adenocarcinoma) and their precursor lesions (cervical intraepithelial neoplasm grade 1/2/3 and cervical adenocarcinoma in situ), vulvar intraepithelial neoplasia grade 1/2/3, vaginal intraepithelial neoplasia grade 1/2/3 and genital warts caused by HPV types 6, 11, 16 and 18 in females 9 years of age and older.

Meanwhile, Zolinza gained approval for the treatment of cutaneous T-cell lymphomas. Cubicin, an antibacterial agent with activity against methicillin-resistant Staphylococcus aureus (MRSA), gained approval for the treatment of MRSA infections.

While Merck has an agreement with Taiho Pharmaceutical Co., Ltd. for the promotion and distribution of Zolinza in Japan, the company has a licensing agreement with Cubist Pharmaceuticals (CBST) for Cubicin. Merck has the right to develop and commercialize Cubicin in Japan. The marketing of these products should help Merck strengthen its commercial presence in Japan. Japan contributed $3.8 billion to total sales in 2010.

Our Recommendation

We currently have a Neutral recommendation on Merck, which carries a Zacks #2 Rank (short-term Buy rating). While Merck is facing headwinds in the form of patent expirations of key drugs, EU pricing pressure, US health care reform, and pipeline setbacks, some of the company’s recent launches should start contributing significantly to the top line in the forthcoming quarters. The recent approval of Victrelis is a major boost for the company. Moreover, the Remicade/Simponi settlement has removed a major overhang from the shares.

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