Recommendation: Buy
| Entry Date | Symbol | Recommendation | Entry Price (USD) | Target 1 (USD) | Target 2 (USD) | Holding Duration | Potential Upside* |
|---|---|---|---|---|---|---|---|
| 31 Jan, 25 | MRK | Buy | USD 98.95 | USD 107.86 | USD 115.77 | 13 days | 17.0% |
*Potential Upside (%) indicates the expected percentage increase from the Entry Price to the Target 2 Price.
Data Powered by EOD Historical Data (“EODHD”).
Merck & Co., Inc. operates as a healthcare company worldwide. It operates through two segments, Pharmaceutical and Animal Health. The Pharmaceutical segment offers human health pharmaceutical products in the areas of oncology, hospital acute care, immunology, neuroscience, virology, cardiovascular, and diabetes, as well as vaccine products, such as preventive pediatric, adolescent, and adult vaccines. The Animal Health segment discovers, develops, manufactures, and markets veterinary pharmaceuticals, vaccines, and health management solutions and services, as well as digitally connected identification, traceability, and monitoring products. The company serves drug wholesalers and retailers, hospitals, and government agencies; managed health care providers, such as health maintenance organizations, pharmacy benefit managers, and other institutions; and physicians and physician distributors, veterinarians, and animal producers. It has collaborations with AstraZeneca PLC; Bayer AG; Eisai Co., Ltd.; Ridgeback Biotherapeutics LP; and Gilead Sciences, Inc. to jointly develop and commercialize long-acting treatments in HIV, as well as a collaboration with Bionomics to identify novel a7 nAChR PAMs suitable for the treatment of cognitive disorder; and clinical trial collaboration and supply agreement with Ankyra Therapeutics to evaluate ANK-101 in combination with KEYTRUDA (pembrolizumab) in patients with advanced solid tumors, as well as a clinical trial collaboration and supply agreement with Phanes Therapeutics, Inc. to evaluate PT886 in combination with KEYTRUDA for the treatment of claudin 18.2 positive gastric or gastroesophageal junction adenocarcinomas, as well as a development and commercialization agreement with Daiichi Sankyo Company, Limited to jointly develop and commercialize Daiichi Sankyo's DXd antibody drug conjugate (ADC) candidates and a collaboration with HiberCell, Inc. Merck & Co., Inc. was founded in 1891 and is headquartered in Rahway, New Jersey.
Animal Health Growth – The Animal Health division saw a 6% increase in sales, reaching $1.5 billion, with 11% growth when excluding foreign exchange impacts. This growth was driven by increased demand for both companion animal and livestock products, supported by new product launches and pricing strategies.
Strong Growth in KEYTRUDA Sales – KEYTRUDA sales increased by 17% year-over-year, reaching $7.4 billion in Q3 2024. Excluding the impact of foreign exchange, the sales growth was even stronger at 21%, demonstrating continued market dominance and expanded usage in earlier-stage cancer treatments.
Drop in JANUVIA/JANUMET Sales – The diabetes franchise, including JANUVIA and JANUMET, saw a 42% drop in sales to $482 million, mainly due to pricing pressures in the U.S. and ongoing generic competition in international markets. This significant decline underscores the challenges in the mature diabetes market.
Decline in GARDASIL/GARDASIL 9 Sales – Sales for GARDASIL/GARDASIL 9 declined by 11% to $2.3 billion, primarily due to lower demand in China. Excluding foreign exchange, the decline was still 10%, highlighting a significant challenge in one of Merck’s key vaccine segments.
Key investment risks for Merck include increasing generic competition for legacy drugs like JANUVIA, regulatory uncertainties affecting pipeline approvals, foreign exchange fluctuations impacting global revenues, and potential market saturation or demand shifts for key products like GARDASIL in critical regions such as China.
| Entry Price | Support* | Target 1 | Target 2 |
|---|---|---|---|
| 98.95 | 86.09 | 107.86 | 115.77 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
Strong Financial Performance and Revenue Growth
Merck & Co., Inc. reported total worldwide sales of $16.7 billion for the third quarter of 2024, reflecting a 4% increase compared to the same period in 2023. Excluding the impact of foreign exchange fluctuations, sales grew by 7%. The primary contributors to this growth were the continued global expansion of KEYTRUDA, strong performance from new product launches such as WINREVAIR and CAPVAXIVE, and robust demand in the Animal Health segment. These gains were partially offset by declining sales of JANUVIA and JANUMET, reduced demand for GARDASIL/GARDASIL 9 in China, and lower sales of LAGEVRIO.
KEYTRUDA and New Product Launches Drive Pharmaceutical Sales
Merck’s pharmaceutical segment generated $14.9 billion in revenue, reflecting a 5% year-over-year increase, or 8% excluding foreign exchange impacts. KEYTRUDA remained the company’s top-performing product, with sales rising by 17% to $7.4 billion, primarily driven by increased usage in earlier-stage oncology indications such as triple-negative breast cancer (TNBC), renal cell carcinoma (RCC), and non-small cell lung cancer (NSCLC). Other notable performers included Lynparza and VAXNEUVANCE, both of which demonstrated double-digit growth, while WINREVAIR, launched in the U.S. in Q2 2024, contributed $149 million in sales. In contrast, sales of JANUVIA and JANUMET declined due to pricing pressures and generic competition, while GARDASIL/GARDASIL 9 saw an 11% decrease in revenue due to lower demand in China.
Animal Health Segment Shows Strong Growth
Merck’s Animal Health division posted revenue of $1.5 billion for the third quarter of 2024, representing a 6% increase, or 11% growth when adjusted for foreign exchange. This growth was driven by higher pricing and demand across both Companion Animal and Livestock product lines, as well as contributions from the recently acquired Elanco aqua business. Sales of BRAVECTO, a leading parasiticide, rose by 13% to $266 million, fueled by increased adoption of new formulations in international markets.
Earnings Performance and Business Development Charges
Merck reported GAAP earnings per share (EPS) of $1.24 for the third quarter of 2024, a 33% decline from the $1.86 reported in Q3 2023. Non-GAAP EPS was $1.57, representing a 26% decline from the prior year. The decreases in both GAAP and non-GAAP EPS were primarily attributed to a net charge of $0.79 per share, reflecting costs associated with business development transactions, including the acquisitions of Eyebiotech Limited (EyeBio) and CN201 (MK-1045) from Curon Biopharmaceutical. In contrast, the third quarter of 2023 did not include any significant business development-related charges.
Research and Development Investments and Expansion
Research and development (R&D) expenses increased significantly to $5.9 billion, a 77% rise from Q3 2023, largely due to Merck’s strategic acquisitions. The acquisition of EyeBio contributed a $1.35 billion charge, while the purchase of CN201 from Curon added another $750 million to expenses. Higher clinical development spending and compensation costs further drove R&D expenditures. These investments support Merck’s long-term innovation strategy, as evidenced by significant advancements in its vaccine pipeline, including the CDC’s ACIP recommendation of CAPVAXIVE for pneumococcal vaccination in adults over 50 and promising clinical results for Clesrovimab, an investigational RSV preventive monoclonal antibody for infants.
Full-Year Financial Outlook and Growth Expectations
Merck has refined its full-year 2024 financial projections, narrowing its expected worldwide sales range to $63.6 billion–$64.1 billion. The company now anticipates non-GAAP EPS to be between $7.72 and $7.77, incorporating a net negative impact of $0.24 per share related to the acquisitions of CN201 and business transactions with Daiichi Sankyo. Despite these near-term charges, Merck remains confident in its ability to drive long-term growth through a diversified portfolio, a strong pipeline, and continued commercial execution across key therapeutic areas.
Considering recent key business, financial updates, current trading levels, and key business risks, a ‘Buy’ recommendation has been given on Merck & Company, Inc (NYSE: MRK) at the closing price of USD 98.95, as on January 30, 2025
Data Powered by EOD Historical Data (“EODHD”).
Sector: Healthcare Industry: Drug Manufacturers - General
| Company | Change (USD) | Price (USD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | Enterprise Value to EBITDA (x) |
|---|---|---|---|---|---|---|---|---|
| MRK Merck & Company Inc |
-2.035 2.27% | 87.72 | 59.83 | 12.33 | 4.50 | 6.47 | 4.94 | 23.79 |
| LLY Eli Lilly and Company |
-11.22 1.36% | 814.69 | 78.14 | 31.95 | 16.34 | 45.83 | 16.65 | 54.36 |
| JNJ Johnson & Johnson |
-9.315 5.62% | 156.53 | 29.17 | 14.33 | 3.74 | 5.18 | 3.80 | 15.22 |
| ABBV AbbVie Inc |
-0.615 0.29% | 208.91 | 61.52 | 14.86 | 5.62 | 51.62 | 6.76 | 20.58 |
| AZN AstraZeneca PLC ADR |
-0.4456 0.61% | 73.05 | 38.69 | 16.31 | 4.67 | 5.46 | 5.20 | 17.74 |
Data Powered by EOD Historical Data (“EODHD”).
Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is January 30, 2025. The reference data in this report has been partly sourced from REFINITIV.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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