Merck
MRK
boasts more than six blockbuster drugs in its portfolio, with the PD-L1 inhibitor, Keytruda, approved for several types of cancer, alone accounting for around 40% of its pharmaceutical sales.
There are several reasons to own the stock at present.
Good Rank, Rising Share Price and Northbound Estimates:
Merck has a Zacks Rank #2 (Buy). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
Earnings estimates for Merck have risen from $7.24 per share to $7.31 per share for 2022 over the past 60 days.
Merck stock has risen 19.9% this year so far compared with an increase of 6.2% for the
industry
.
Image Source: Zacks Investment Research
Oncology Drugs Driving Growth:
Keytruda is already approved for the treatment of many cancers globally. Keytruda sales are gaining from continued uptake in lung cancer and increasing usage in other cancer indications. Keytruda is continuously growing and expanding into new indications and markets globally. Numerous recent approvals and the expected launch of many additional indications, including in earlier lines of therapy, can further boost sales. Keytruda is presently approved to treat five indications in earlier-stage cancers in the United States. In the United States, Merck expects over half of Keytruda’s growth to come from indications in early-stage (neoadjuvant/adjuvant) treatment settings through 2025 and to represent roughly 25% of total global Keytruda sales by that time.
In Oncology, alliance revenues from Lynparza and Lenvima are also boosting Merck’s oncology sales.
Please note that Merck markets Lynparza in partnership with
AstraZeneca
AZN
.
AstraZeneca and Merck had formed the profit-sharing deal to co-market Lynparza and Koselugo in July 2017.
AstraZeneca and Merck’s Lynparza is approved for four cancer types, namely, ovarian, breast, prostate and pancreatic. Lynparza is being evaluated in combination with Keytruda for colorectal cancer and lung cancer indications.
Gardasil and Animal Health Unit Contributing to Growth:
Beyond oncology, which is expected to drive durable growth into the next decade, Merck has important products in its portfolio, including Gardasil vaccine to prevent HPV-related cancers. Sales of Gardasil vaccine grew 40% in 2021. Merck expects Gardasil growth to benefit from increased supply as it is investing in expanding manufacturing capacity. Merck expects Gardasil sales to potentially double by 2030.
Merck’s Animal Health business has been a key contributor to its top-line growth with the company recording above-market growth. The trend is expected to continue in the remainder of 2022.
Oral COVID Pill to Contribute to Growth:
Merck and partner Ridgeback Biotherapeutics’ COVID oral antiviral pill, Lagevrio will also be a key top-line driver in 2022. Merck has a number of supply and purchase agreements in place for providing approximately 10 million courses of COVID therapy, which is expected to generate $5 billion to $5.5 billion in revenues in 2022. Merck has already delivered approximately 6.4 million courses to more than 30 countries.
Conclusion
Merck does have its share of problems like generic competition for several drugs and rising competitive pressure, mainly on the diabetes franchise. There are concerns about Merck’s ability to grow its non-oncology business ahead of Keytruda’s loss of exclusivity later in the decade.
Nonetheless, strong sales of key products like Keytruda and Gardasil, a significant contribution from Lagevrio and positive pipeline/regulatory developments can keep the stock afloat in 2022.
Zacks Rank & Stocks to Consider
Merck currently carries a Zacks Rank #3 (Hold). Some better-ranked biotech stocks are
Novo
Nordisk
NVO
and
Sesen Bio
SESN
. While Sesen Bio sports a Zacks Rank of 1 (Strong Buy), Novo Nordisk has a Zacks Rank of 2 (Buy). You can see
the complete list of today’s Zacks #1 Rank stocks here
.
Novo Nordisk’s earnings per share have risen from $3.35 per share to $3.48 per share for 2022 and from $3.94 per share to $4.19 per share over the past 60 days.
Earnings of Novo Nordisk beat estimates in each of the last four quarters, the average surprise being 7.56%. The stock has declined 3.8% in the past three months.
The Zacks Consensus Estimate for Sesen Bio’s2022 loss has declined from 46 cents to 44 cents per share in the past 60 days. Shares of SESN have risen 34.5% in the past three months.
Earnings of Sesen Bio beat estimates in three of the last four quarters and missed the mark on one occasion, the average surprise being 69.9%.
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