Merck, initiated at buy, is Jefferies top pharma pick
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- Jefferies has initiated Merck (NYSE:MRK) with a buy rating based on a better EPS growth profile compared to its large-cap peers and long-term growth of its blockbuster oncologic Keytruda (pembrolizumab).
- The firm, which has a price target of $125 (17% upside based on Friday's close), named Merck (MRK) its top pharma pick.
- Analyst Akash Tewari noted that while others on the Street have expressed concerned with Keytruda's loss of exclusivity -- a potential $30B problem -- coming in 2028, those worries may be misguided.
- "Near term growth is driven by Keytruda's recent indication expansions, while longer-term growth is driven by ex-US patents that expire past 2028 [loss of exclusivity] mark, potential co-formulations, and potential [subcutaneous] formula of Keytruda," he wrote, adding that Jeffries is 40% above consensus for Keytruda outer years sales.
- Tewari added that the pharma's cardiovascular portfolio also weighed heavily on its rating. Jefferies sees $7.5B in peak sales for sotatercept for pulmonary arterial hypertension and $2.5B for oral PSCK9 inhibitor MK-0616 for high cholesterol.
- Read why Seeking Alpha contributor BiotechValley Insights agrees that Merck (MRK) is a buy.