By Val Brickates Kennedy

News that U.S. drugmakers Merck & Co. (MRK) and Schering-Plough Corp. (SGP) plan to merge did little to stoke trading in the sector early Monday, as the benchmark sector indexes appeared to shrug off news of the latest Big Pharma mega-merger.

The Amex Pharmaceutical Index crept up 0.6% to 22.52 and the Amex Biotechnology Index eased 0.4% to 561.71. The broader market edged into positive territory after beginning the session in the red.

Shares of Merck dived as Schering-Plough stock soared on news that the business partners planned to merge in a deal valued at just over $41 billion. Merck and Schering-Plough already co-market the cholesterol-controlling drugs Zetia and Vytorin.

Merck shares dived 11% at one point, before settling at $22.07, down 3%. Schering-Plough shares, meanwhile, soared 17% to $20.91.

The announcement comes just a little over a month after sector heavyweights Pfizer Inc. (PFE) and Wyeth (WYE) announced they planned to merge in a deal worth about $68 billion.

Shares of Wyeth and Pfizer were both up about 1% earlier Monday.

Shares of Genentech Inc. (DNA) were off about 1% at $90.18.

On Friday, Swiss drugmaker Roche upped its hostile tender offer for the biotech giant to $93 a share from $86.50. Roche already holds about 56% of Genentech's shares.

Genentech advised shareholders on Friday not to act on the bid until its board has issued a recommendation. The company has said it believes it is worth around $112 a share.

Shares of Johnson & Johnson (JNJ) were down almost 2% earlier Monday at $47.12. The healthcare giant co-markets the popular rheumatoid arthritis drug Remicade with Schering-Plough. On the Merck/Schering-Plough conference call early Monday, analysts questioned how the merger would affect the marketing rights of both Remicade and a planned successor product, golimumab.

News that President Barack Obama plans to lift certain restrictions on the federal funding of stem cells research fueled trading amongst stem cell researchers.

Shares of Geron Corp. (GERN) jumped 20% to $4.69, while Aastrom Biosciences (ASTM) rocketed 62% to 54 cents. StemCells Inc. (STEM) shares shot up 36% to $1.88, as tiny Advanced Cell Technology (ACTC) saw its shares soar 68% to 19 cents a share.

-Val Brickates Kennedy; 415-439-6400; AskNewswires@dowjones.com