SunTrust's Latest Comments On Merck

In a report published Tuesday, SunTrust Robinson Humphrey analyst John Boris discussed the FDA AdCom's vote to add safety warnings to AstraZeneca plc (NYSE: AZN)'s Onglyza and Takeda's Nesina, which is a positive for Merck & Co., Inc. (NYSE: MRK)'s Januvia franchise.

The FDA AdCom voted that Onglyza has an acceptable CV risk profile (13 Yes, 1 No, 1 Abstain) and for safety label changes (14 Yes, 1 No). The voting outcome was similar on CV risk for Nesina (16 Yes, 0 No) and safety label changes (13 Yes and 3 No).

"The votes are a positive for the DPP-4 class as there was risk of a more restricted label due to potential heart failure (HF) signals," Boris wrote. "In general, panelists voiced more concern that the signal of increased hospitalizations for heart failure may be real; however, the concern centered on high risk patients (eGFR <60, high BNP, & prior HF) which could be addressed through a label change communicated to physicians."

Boris said the votes "provide relief" for the class and benefits of Merck's Januvia as well as Eli Lilly and Co (NYSE: LLY)'s Tradjenta franchises contingent on limited HF risk being seen in their respective TECOS (results in June) and CARMELINA (results in 2018) CV outcomes trials.

The analyst also added that Merck's ongoing restructuring combined with asset divestures and a rising pipeline will drive its share performance. In addition, the company could realize cost savings earlier than the Street is expecting with material cuts to its R&D organization and sales force.

Shares remain Buy rated with an unchanged $72 price target.