Goldman Sachs’ Stocks With Highest Consensus Returns: 42 Stocks With The Highest Consensus ROE

20. Merck & Co., Inc. (NYSE:MRK)

Consensus ROE: 18%

Number of Hedge Fund Investors in Q2 2024: 96

Merck & Co., Inc. (NYSE:MRK) is a global pharmaceutical and healthcare giant. It is one of the largest companies in the world and has considerable financial resources as evidenced by $7 billion in cash and $10 billion in receivables. Like every other pharma company, Merck & Co., Inc. (NYSE:MRK)’s hypothesis depends on its ability to grow and scale existing drugs and simultaneously maintain a robust pipeline of new drugs to ensure revenue doesn’t drop when patents for existing products expire. On the former front, 45% of Merck & Co., Inc. (NYSE:MRK)’s Q2 sales were driven by its blockbuster cancer drug KEYTRUDA which raked in $7.3 billion in sales. This marked a 21% annual growth, and after KEYTRUDA, another high performing drug is Merck & Co., Inc. (NYSE:MRK)’s GARDASIL HPV vaccine. KEYTRUDA’s patents are set to expire in 2028, and keeping an eye on the future, Merck & Co., Inc. (NYSE:MRK) recently acquired an antibody for cancer and immune system diseases for $750 million. It is also developing a treatment for non small cell lung cancer (NCLSC), a treatment for thrombocythemia, and a treatment for diabetic macular edema. However, Merck & Co., Inc. (NYSE:MRK) could see some headwinds if future drug negotiations with the US government lead to lower payouts.

Baron Funds mentioned Merck & Co., Inc. (NYSE:MRK) in its Q1 2024 investor letter. Here is what the fund said:

“Global pharmaceutical company Merck & Co., Inc. contributed on the continued growth of Keytruda, the company’s key asset and the leading immuno-oncology agent used to treat a variety of cancers. The FDA’s late March approval of pulmonary arterial hypertension drug sotatercept, also drove share gains. We retain conviction as Merck has started to transition from prioritizing its Keytruda franchise to building a more diversified business, with a focus on the Gardasil vaccine, pneumococcal vaccine development, and cardiovascular drug development, well in advance of the scheduled expiration of patent protection/exclusivity rights.”