Cyber Monday Deal: Up to 60% off InvestingProCLAIM SALE

Merck shares target cut, outperform on Gardasil China concerns

EditorNatashya Angelica
Published 11/01/2024, 09:36 PM
MRK
-

On Friday, BMO Capital Markets adjusted its outlook on Merck & Co. Inc. (NYSE:MRK) shares, reducing the pharmaceutical giant's stock price target from $150.00 to $136.00, while still maintaining an Outperform rating. The revision follows a reassessment of the Gardasil vaccine's prospects in the Chinese market.

The analyst from BMO Capital cited concerns over the HPV vaccine Gardasil's performance in China as the primary reason for the price target adjustment. According to the analyst, the resolution of Gardasil's issues in China, which involves working through existing inventory by Zhifei and stimulating demand in the Chinese market, is not anticipated to occur in 2024. Consequently, the analyst has significantly decreased Gardasil revenue forecasts for the years 2024 and 2025.

Despite the reduction in the price target, the analyst emphasized that the more than 20% drop in Merck's stock price since the second quarter of 2024 does not fully account for the company's overall business robustness. The decline in share value has been largely attributed to the Gardasil vaccine and, to a lesser extent, data from the Summit studies.

In contrast to the Gardasil situation, the analyst highlighted Winrevair as a positive element in Merck's portfolio. The product continues to see strong organic demand, which is contributing to its uptake in the market. This aspect of Merck's business is seen as a key driver of growth despite the challenges faced by the Gardasil vaccine.

In other recent news, Merck & Co. 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. Despite a 10% decline in GARDASIL sales, primarily in China, the company projects significant market opportunities and aims for $11 billion in sales by 2030.

Leerink Partners maintained an Outperform rating on Merck's shares, citing ongoing concerns about the Gardasil vaccine as a factor affecting investor sentiment, particularly due to challenges in the Chinese market.

Merck's management expressed confidence in Gardasil's revenue sustainability, particularly in China, and highlighted strong growth outside of China. Notwithstanding, Leerink Partners underscored the opacity of the Chinese market as a challenge for global investors. The firm also noted that cultural barriers may limit Gardasil uptake among males in China, an issue that Merck's management indicated requires time to resolve.

Merck's earnings call underscored a robust pipeline, with nearly tripled Phase 3 assets, and a dedication to strategic investments for sustained growth. The company also announced positive clinical advancements and FDA approvals, strengthening its oncology portfolio. These are among the recent developments shaping the company's trajectory.

InvestingPro Insights

Despite the recent challenges with Gardasil in China, InvestingPro data reveals that Merck & Co. Inc. (NYSE:MRK) maintains a strong financial position. The company's revenue growth of 7.15% over the last twelve months demonstrates its ability to generate sales even in challenging market conditions. Additionally, Merck's impressive gross profit margin of 75.79% underscores its operational efficiency and pricing power in the pharmaceutical industry.

InvestingPro Tips highlight Merck's commitment to shareholder returns, noting that the company has raised its dividend for 13 consecutive years and maintained dividend payments for 54 consecutive years. This consistent dividend policy may provide some reassurance to investors concerned about the recent stock price decline.

It's worth noting that while BMO Capital Markets reduced their price target, InvestingPro's Fair Value estimate for Merck stands at $118.5, suggesting potential upside from current levels. Investors seeking a more comprehensive analysis can access 10 additional InvestingPro Tips for Merck, offering deeper insights into the company's financial health and market position.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.