On Tuesday, Truist Securities adjusted its price target on shares of pharmaceutical giant Merck & Co., Inc. (NYSE:MRK), bringing it down to $132.00 from the previous $143.00. Despite the reduction, the firm maintains a Buy rating on the stock.
The revision comes after Merck completed the acquisition of CN201 from Curon Biopharma, which necessitated changes to the company's financial model.
The updated Merck model now reflects a significant $750 million in-process research and development (IPR&D) charge associated with the acquisition. This charge is non-tax deductible and has led to an increase in the projected research and development expenses for the third quarter of 2024. The R&D expense forecast has been raised to $5.8 billion, up from the prior estimate of $5.1 billion.
The IPR&D charge has also impacted Merck's non-GAAP earnings per share (EPS) projections for the third quarter of 2024. The new estimate is $1.46, which is a decrease from the previously anticipated $1.71. Additionally, Truist Securities has revised revenue estimates for Merck's vaccine, Gardasil, for the third and fourth quarters of 2024, due to uncertainties regarding sales in China.
The new forecast anticipates revenues of $2.6 billion and $1.9 billion for the respective quarters, down from the previous estimates of $2.8 billion and $2.5 billion.
Furthermore, the firm has adjusted its peak sales estimate for Gardasil, now expecting peak sales to reach $11.1 billion, a decrease from the earlier projection of $13.7 billion. This comprehensive update to Merck's financial model, accounting for the recent acquisition and its associated costs, has led to the new price target of $132.00 for the company's shares.
In other recent news, Merck & Co., Inc. has announced a series of significant developments. The company reported positive results from its Phase 3 KEYNOTE-689 trial, showing a statistically significant improvement in event-free survival for patients treated with KEYTRUDA in combination with standard radiotherapy.
Merck also acquired a novel bispecific antibody, CN201, from Curon Biopharmaceutical for approximately $750 million, aiming to advance treatments for B-cell malignancies and autoimmune diseases.
Furthermore, Merck reported positive Phase 2 results for its inflammatory bowel disease treatment, tulisokibart, demonstrating sustained efficacy and a consistent safety profile. However, the company's investigational therapy for colorectal cancer did not meet its primary goal in a late-stage clinical trial.
Analyst firms TD Cowen and BMO Capital Markets maintained their Buy and Outperform ratings on Merck, respectively, citing the company's favorable position among its pharmaceutical peers and the strong performance of its investigational therapy, ivonescimab. These are some of the recent developments in Merck's operations.
InvestingPro Insights
In light of Truist Securities' revised outlook for Merck & Co., Inc. (NYSE:MRK), it's worth considering some additional financial metrics and insights from InvestingPro. Despite the reduced price target, Merck's financials remain robust. The company boasts a market capitalization of $274.93 billion and a revenue of $62.48 billion over the last twelve months as of Q2 2024, with a healthy revenue growth of 7.15% during the same period.
InvestingPro Tips highlight Merck's financial stability and growth potential. The company has raised its dividend for 13 consecutive years and is expected to see net income growth this year. These factors align with Truist's maintained Buy rating, suggesting long-term value despite short-term adjustments.
Merck's P/E ratio (adjusted) stands at 16.59, indicating a reasonable valuation relative to earnings, especially considering the company's strong market position in the pharmaceuticals industry. For investors seeking more comprehensive analysis, InvestingPro offers an additional 8 tips for Merck, providing deeper insights into the company's financial health and market position.
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