2. Merck & Co. Inc. (NYSE:MRK)
Average Upside Potential: 25.53%
Number of Hedge Fund Holders: 96
Merck & Co. Inc. (NYSE:MRK) is a global pharmaceutical company that develops, manufactures, and markets prescription medicines and vaccines. It has a strong focus on research and development, and its products are used to treat a wide range of diseases, including cancer, cardiovascular diseases, infectious diseases, and autoimmune disorders.
Q2 2024 revenue increased by 7.16% year-over-year. The Human Health segment saw 11% growth, Animal Health grew by 6%, and KEYTRUDA sales surged by 21%. Vaccines like GARDASIL and VAXNEUVANCE experienced growth of 4% and 16%, respectively. Merck secured FDA approval and ACIP recommendation for its new pneumococcal conjugate vaccine, CAPVAXIVE, for adults. Additionally, WINREVAIR, a vaccine for adult patients with pulmonary arterial hypertension, was approved and generated over $70 million in sales during the quarter.
The company expanded its presence in animal health by acquiring Elanco’s aqua business and entered the ophthalmology market through the acquisition of EyeBio, aiming to develop treatments for retinal conditions. As October began, it completed the acquisition of CN201, a bispecific antibody for the treatment of B-cell-associated diseases. It’s being investigated in clinical trials for NHL and ALL.
The company’s CAPVAXIVE, a new Pneumococcal 21-valent Conjugate Vaccine, is showing promising results in protecting adults from pneumococcal disease. The vaccine demonstrated strong immune responses and was well-tolerated in clinical trials. It is designed to cover a broader range of pneumococcal serotypes than existing vaccines, providing additional protection for adults at high risk.
It’s poised for continued growth due to its international expansion, diverse drug portfolio, and strong financial results. The acquisition of Harpoon Therapeutics is expected to strengthen its oncology pipeline and create opportunities for new combination therapies. Hence, Merck & Co. Inc. (NYSE:MRK) is rather well-positioned for success.
Oakmark Equity and Income Fund stated the following regarding Merck & Co., Inc. (NYSE:MRK) in its Q3 2024 investor letter:
“Merck & Co., Inc. (NYSE:MRK) is a global pharmaceutical firm with leading oncology, vaccine and animal health franchises. Premier products in Merck’s portfolio include Keytruda, Gardasil, Winrevair and Bravecto. Outsized contributor Keytruda is an immuno-oncology drug that treats several cancers and tumors. Keytruda is an astounding clinical and commercial success that is on track to become one of the best-selling prescription drugs to date. Investor angst surrounding Keytruda’s pending U.S. patent expiration in 2028 presented a chance to buy shares at a discounted valuation. We believe opportunities to extend Keytruda’s duration through life cycle management are underappreciated. More importantly, discounted cash flows from products already on market cover today’s entire stock price, meaning there is minimal value ascribed to a promising pipeline with strong sales potential. We believe Merck is led by a capable management team that looks to reinvest these cash flows in an accretive manner.”
