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Merck shares climb after drug trial ends early

Shares of Merck & Co. Inc. jumped Thursday, defying a broader market sell-off, after the drugmaker ended the late-stage study of an osteoporosis treatment because there was clear evidence of success.

THE SPARK: The Whitehouse Station, N.J., company said Wednesday it decided to end the trial of odanacatib based on an analysis of early results by an independent monitoring committee. The trial compared odanacatib's effectiveness in reducing the risk of bone fractures in post-menopausal women with results from a patient population that took a placebo.

Merck said the monitoring committee identified some possible safety concerns with the drug. The drugmaker will continue to evaluate the effectiveness and safety of odanacatib in extension studies.

THE BIG PICTURE: Merck plans to file for marketing approval of odanacatib in the U.S., European Union, and Japan in the first half of 2013.

The potential drug is crucial for Merck, the world's third largest drugmaker, which will lose U.S. patent protection for its top seller, the asthma and allergy drug Singulair, next month. Singulair brought in $5.5 billion in sales last year, but a loss of patent protection means it will be exposed to cheaper generic alternatives.

Osteoporosis treatments represent a big growth opportunity for drugmakers, as the baby boom generation ages in the United States, Europe, Japan and other key markets. But any new treatments also would enter a competitive market filled with other brand-name and generic treatments.

Merck pioneered osteoporosis drugs — taken to prevent sometimes crippling fractures in the spine, hip and other joints — with its blockbuster Fosamax, which lost patent protection a few years ago.

THE ANALYSIS: Credit Suisse analyst Catherine Arnold called Wednesday's announcement a "very positive development" for Merck. She said in a research note odanacatib's potential appears to be underappreciated by the market, with the consensus estimate for peak annual sales ranging between $700 million and $800 million. Credit Suisse predicts the drug's sales will peak at $1.1 billion.

Bernstein analyst Dr. Tim Anderson said in a separate note that the trial only compared odanacatib to a generic, and it will be critical to see how the drug's fracture data compares to current treatments. He said the treatment will have to do better than the competition in this area to become a major commercial success.

SHARE ACTION: Merck shares started climbing Wednesday evening in aftermarket trading. On Thursday, they advanced more than 4 percent, or $1.74, to $42.95. That marked the stock's first one-day climb of more than 4 percent since last August. Meanwhile, broader trading indexes fell less than 1 percent.

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