On Tuesday, JPMorgan reaffirmed its Overweight rating and $145.00 stock price target for Merck (NS:PROR) & Co Inc (NYSE:MRK), following the pharmaceutical company's announcement of positive trial results for a subcutaneous formulation of its cancer drug Keytruda. The successful completion of the Phase 3 trial, which met its dual primary pharmacokinetic endpoints, is seen as a significant step in sustaining the long-term viability of Merck's Keytruda franchise in the United States.
Merck's recent trial results indicate a potential shift in the administration of Keytruda, with expectations that about one-third of its U.S. Keytruda business, particularly in adjuvant and monotherapy treatments, could transition to the subcutaneous format.
This change is anticipated due to the easier administration method when compared to intravenous delivery. The analyst from JPMorgan suggests that this could help extend some of the Keytruda franchise beyond its late-2028 U.S. patent expiry.
The analyst further notes that the impact of Keytruda's patent loss is considered manageable and is already factored into the company's valuation. Merck is expected to avoid a significant drop in earnings post-2028 due to its diverse pipeline and the likely gradual erosion of Keytruda's market share. Merck's trading valuation is highlighted as approximately 7.5 times the projected peak earnings per share for 2028/29.
Additionally, the analyst points to several catalysts expected to drive Merck's stock performance over the next 6 to 12 months. These catalysts include normalized trends for Gardasil, Merck's vaccine for human papillomavirus, continued strong performance from Winrevair, and forthcoming updates from the company's pipeline within the next 12 to 18 months.
In summary, with Merck's shares trading at around 10 times the estimated earnings per share for 2025, JPMorgan views the stock as highly attractive, particularly for investors with a 6 to 12-month investment horizon who can capitalize on the anticipated catalysts that may lead to outperformance.
In other recent news, Merck & Co., Inc. has received a positive opinion from the European Medicines Agency's Committee for Medicinal Products for Human Use for the use of its immunotherapy drug KEYTRUDA for mesothelioma treatment.
This development comes after the IND.227/KEYNOTE-483 trial showed significant improvements in overall survival rates with KEYTRUDA. A final decision on marketing authorization within the EU is expected in the fourth quarter of 2024.
Jefferies has raised the company's share target to $148, following Merck's strategic move to license a preclinical PD1xVEGF therapy from LaNova. This is anticipated to strengthen Merck's oncology portfolio. However, BMO Capital Markets revised its outlook on Merck, reducing the price target due to concerns over the Gardasil vaccine's performance in China.
Merck, in collaboration with Alexion (NASDAQ:ALXN) and AstraZeneca (NASDAQ:AZN) Rare Disease, announced positive results from the Phase 3 KOMET trial of KOSELUGO in adults with neurofibromatosis type 1. The trial showed a significant improvement in the objective response rate.
Despite challenges, Merck reported a 4% increase in third-quarter revenue for 2024, reaching $16.7 billion, driven by strong sales of its cancer drug KEYTRUDA and the introduction of WINREVAIR. These are among the recent developments shaping Merck's trajectory.
InvestingPro Insights
Merck's recent positive trial results for Keytruda's subcutaneous formulation align well with the company's strong financial position and market standing. According to InvestingPro data, Merck boasts a substantial market capitalization of $244.26 billion, underlining its significance in the pharmaceutical industry. The company's revenue growth of 6.51% over the last twelve months demonstrates its ability to expand its market presence, which is crucial for sustaining long-term success in the competitive pharma sector.
InvestingPro Tips highlight Merck's financial stability and shareholder-friendly policies. The company has maintained dividend payments for 54 consecutive years and has raised its dividend for 13 consecutive years, showcasing its commitment to returning value to shareholders. This consistent dividend policy aligns with the analyst's view of Merck as an attractive investment, especially considering its current trading price near its 52-week low.
Furthermore, Merck's P/E ratio of 15.49 (adjusted for the last twelve months) suggests that the stock may be undervalued relative to its earnings potential, supporting JPMorgan's Overweight rating. This valuation metric, combined with the analyst's positive outlook on upcoming catalysts, reinforces the potential for stock outperformance in the near term.
For investors seeking a deeper understanding of Merck's financial health and market position, InvestingPro offers 13 additional tips, providing a comprehensive analysis to inform investment decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.