Categories Analysis, Health Care

Is Merck (MRK) stock still a buy after losing the vaccine race?

Keytruda, Merck's flagship product and key growth driver, is expected to become the world's top-selling drug soon

After bringing the global economy to a grinding halt, the coronavirus pandemic is subsiding in most regions, thanks to the mass production of vaccines developed by leading pharma companies. Merck & Co., Inc. (NYSE: MRK), a late entrant in the COVID vaccine race, discontinued its program after early-stage clinical trials failed to meet the endpoints. Currently, the company is focused on two experimental COVID-19 drugs.

Shares of the New Jersey-headquartered drugmaker have gained about 6% this month and are trading close to the $75-mark. Though it is near the 52-week average, the stock has more room to grow and is forecast to gain 18% in the next twelve months. So, it makes sense to keep it on the watchlist. 


Read management/analysts’ comments on Merck’s Q1 earnings


Keytruda, the company’s flagship product that is indicated for the treatment of skin cancer, is the second-best-selling medicine in the world. It is estimated that Keytruda would soon become the top-selling drug and remain the primary growth driver. That’s because AbbVie’s (NYSE: ABBV) Humira, which holds the number-1 position currently, is about to lose exclusivity due to patent expiry, while Kaytruda‘s patent is valid for a few more years.

Promising Pipeline

Merck has an impressive pipeline, with some major products under various stages of development. While the other leading cnadidates like Bridion and the company’s animal-health portfolio continue to contribute to top-line growth, that is often offset by muted patient turnout at healthcare facilities.

The bottom-line performance has not been very impressive in the last two quarters, with earnings falling short of Wall Street’s prediction for the first time in several years. In the first quarter of 2021, adjusted earnings dropped 7% to $1.40 per share and missed the consensus forecast. At $12.1 billion, net revenue was unchanged year-over-year but came in below the estimates.

CEO Transition

Merck is headed for a change of guard that is significant considering the prevailing market condition – CEO Kenneth Frazier will be stepping down towards the end of the first half, to be succeeded by president Robert Davis. In an effort to focus more on the growth areas, the company recently separated its Organon business, which became an independent public firm after the spin-off.


Is Eli Lilly a good bet in COVID-challenged healthcare market?


Upon the close of the Organon spin-off, we expect to receive a special tax-free dividend of $9 billion, which we hope to deploy in a value-enhancing strategic business development opportunity. In the absence of meaningful business development, we intend to return cash to shareholders through share repurchases. As always, we remain committed to ensuring appropriate investment in our business, both in support of our key brands, but also to drive forward the innovation progressing in our pipeline.

Merck’s chief financial officer Caroline Litchfield

Stock Performance

After making some of the biggest intra-day gains this week, Merck’s stock closed the last trading session at $74.04 and rose modestly in Friday’s pre-market session. It is down 2% since the beginning of the year.

Looking for more insights on the earnings results? Click here to access the full transcripts of the latest earnings conference calls!

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