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Tickers in this Article: MRK, PFE, NVS, BMY
Longer-term the drug space has a great deal of promise thanks in large part to our aging population and an increase in the number of people that inhabit this country. However, there are several companies that are producing solid earnings right now, and that warrant attention now. Merck (NYSE:MRK) comes to mind, largely because of its first quarter earnings release earlier this week.

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In This Case Doing Drugs Makes Sense
Merck hasn't been the center of attention in the pharmaceutical space in quite a while. That could soon change. Merck deserves attention for several reasons. From a long-term perspective, its recent combination of forces with Schering Plough could lead to significant cost savings, and could yield or lead to a number of money making drugs. Also, near-term yours truly sees some promise too.

For those that missed it, or were pre-occupied with the broader market sell off on Tuesday morning, the New Jersey based company released solid first quarter earnings on that day. The company earned 83 cents per share excluding items - nicely ahead of the 75 cents analysts had been figuring on. Meanwhile, in the release the company offered the following regarding its financial targets management stated, "For 2010, Merck is targeting a non-GAAP EPS range of $3.27 to $3.41, excluding certain items, and a 2010 GAAP EPS range of $1.15 to $1.50."

Now some investors may not be totally thrilled with that outlook. After all, the Street is expecting the company to earn $3.40 a share this year. However, my feel is that the outlook the company provided will prove conservative and that the current estimate will prove doable. Keep in mind that the company has currently beaten expectations in three of the last four quarters and management will probably be eager to continue to please the investment community.

It also seems as if Wall Street is not giving Merck too many kudos for its combination with Schering Plough. Again, by gobbling up such a large company there is very likely to be significant cost savings that could enhance the bottom line. Also, its size and pipeline is likely to draw a great deal of interest and inquiries from buy and sell side investors. And Merck isn't the only company with good tasting medicine.

Drugs Not Hugs?
Pfizer (NYSE:PFE), famous for Viagra among other popular products, earned 60 cents per share excluding items in Q1. That was leaps and bounds ahead of the 53 cents analysts had been looking for. Another interesting point worth mentioning is that the company trades at under 8 times this year's estimate, which is $2.18. That seems reasonable for a company of its size, given its deep pockets, reputation, reach and potential to show earnings growth in the years to come.

Two other drug companies deserve attention. The Bristol Myers (NYSE:BMY) board apparently gave the nod to a large repurchase program. Data shows that BMY has beaten expectations in each of the last two quarters. Meanwhile, Novartis (NYSE:NVS), another big name, is coming off a better-than-expected quarter and warrants attention too.

Bottom Line
While the long term may hold promise for investors in the drug space, there are companies that are performing well on the earnings front currently that deserve added attention. Merck is atop my favorites list thanks largely to its recent quarterly beat and the earnings it can potentially generate this year and next. (For related reading, check out Measuring The Medicine Makers.)

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