Merck Seems Confident About New Launches

-7.29%
Downside
132
Market
122
Trefis
MRK: Merck logo
MRK
Merck

As expected, Merck‘s (NYSE:MRK) revenues declined during the first quarter of 2015. This was partially due to strengthening dollar and partially due to the impact of divestitures and competitive pressure. The company’s cardiovascular division’s sales fell yet again, even after excluding the impact of adverse currency movement. Revenues from Zetia/Vytorin came down by 2% operationally. However, this figure was an improvement over last quarter’s, which may have resulted from IMPROVE-IT trial specific to Vytorin, which combines Zetia with a statin drug. The trial has shown the drug’s advantage over other medicines in terms of reduced cardiovascular events. The silver lining was that  Januvia grew strongly internationally, as well as improved its prescription share in the U.S. Additionally, the growth in Simponi offset the decline in Remicade revenues, which faced more than expected competitive pressure from biosimilars. However, the future is more hinged on how Keytruda and hepatitis C pipeline play out.

Our price estimate for Merck stands at $60.57, which is roughly in-line with the market.

See our complete analysis for Merck

Relevant Articles
  1. At $100 Does Merck Stock Have Room For Growth?
  2. Should You Pick Merck Stock Over Coca-Cola?
  3. Should You Buy Merck Stock After An Upbeat Q2?
  4. How Has Merck Stock Performed During The 2022-23 Inflation Shock?
  5. Is Merck Stock A Better Pick Over ABBV?
  6. Should You Buy Merck Stock At $120?

Merck’s revenue decline was less than expected, and the outlook has been lifted, whereas many firms have reduced their outlook for 2015 in wake of continued adverse currency movements. This suggests Merck’s confidence in its newly launched drugs. Keytruda, Belsomra and Zerbaxa are some of the key new products. Among these, we believe Keytruda has the biggest potential. Merck has recently announced a couple of new filings for the drug in lung cancer and melanoma. In addition, the company stated that its hepatitis C trials have shown significant cure rates across multiple patient types, including those who are hard to treat.

Merck has been looking to get a breakthrough in Hepatitis C market, but its clinical trials haven’t seen the expected success. In November 2014, the company released clinical trial data of a triple-pill regimen for the treatment of treatment-naive group of cirrhotic patients. The combination included a mix of Merck’s Grazoprevir/Elbasvir (MK-5172/MK-8742, MK-5172A)  along with Gilead Science’s Sovaldi. The therapy achieved a cure rate of more than 94% for 8-week therapy, but fell short of satisfactory cure rates in case of 6-week and 4-week therapy. In fact, only 38.7% of the patients showed no signs of the virus after 4-week treatment. ((Merck four-week hep C regimen with Gilead’s Sovaldi comes up short, Reuters, Nov 10 2014) Thus, Merck’s attempt to gain a competitive advantage over current market leaders fell well short of its target.

Having said this, it is possible that we are underestimating Merck’s competitiveness in Hepatitis C market. Its acquisition of Idenix last year has given it the necessary expertise to compete in this lucrative segment. The company is now focusing on clinical trials of combination of MK-5172 and MK-8742, and may file the new drug application soon. However, it has lost breakthrough therapy designation for these drugs. Nevertheless, a highly competitive drug could add incremental revenues of close to $3-4 billion over the next few years, adding 10% to our price estimate and more than 10% to our EPS for 2017.

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap

More Trefis Research