Update: Merck recovers from Vioxx

(Fortune Magazine) -- What we said In "Merck Is on the Mend" (Feb. 5), we recommended a second look at the pharma giant, which was recovering from the low it reached in 2004 amid the Vioxx debacle. We mentioned that Merck (Charts, Fortune 500) was winning approvals for a host of new drugs, including cervical-cancer vaccine Gardasil. We cited Bear Stearns analyst John Boris's year-end price target of $53.

What happened: Merck's recovery is proceeding as planned. The stock is up from $44 when we wrote about it to just shy of $55 on Oct. 22, a gain of nearly 25%. The latest push came from strong third-quarter earnings aided by robust sales of Gardasil, new diabetes pill Januvia, and asthma drug Singulair. The company's cost-cutting program also helped.

While Vioxx lawsuits continue, they don't seem to be weighing on the stock. The legal problems are "manageable ... for the company given its financial strength and its track record defending itself," says Deutsche Bank analyst Barbara Ryan. And while Merck faces a slew of patent expirations -- starting with osteoporosis blockbuster Fosamax next year -- analysts are positive about its pipeline of new offerings, including Isentress, an HIV treatment that just won FDA approval.