We recently compiled a list of the 7 Best Diabetes Stocks To Buy Now. In this article, we are going to take a look at where Merck & Co., Inc. (NYSE:MRK) stands against the other diabetes stocks.
According to the WHO, approximately 422 million individuals globally suffer from diabetes, with the majority residing in countries with low or middle incomes. Diabetes is directly responsible for an average of 1.5 million fatalities annually. Over the past few decades, there has been a steady rise in both the number of cases and the prevalence of diabetes. On the other hand, the International Diabetes Federation estimates that there are about 500 million diabetics worldwide, and that figure is projected to grow by 25% by 2030 and by 51% by 2045.
To help manage diabetes, both type 1 and type 2, one particular kind of medical device used is the continuous glucose monitor (CGM). The market has grown dramatically in recent years, and it has become a rapidly expanding section of diabetes care devices. The market for advanced diabetes care products — insulin pumps, pens, and continuous glucose monitoring (CGM) equipment, was estimated to be worth $21.8 billion in 2023 per GlobalData. Forecasts from GlobalData indicate that the market will reach revenues of $33.4 billion by 2030, rising at a CAGR of 6.34% over the forecast period.
As per the GlobalData marketed products database, the CGM category presently has 97 products. The vast majority of these devices are traditional CGMs, with only a few implantable sensors. According to the GlobalData pipeline products database, 133 products are either under development or approved. The figures show that this market segment is expanding quickly and is a hub for innovative new technology like implantable CGMs.
Today, CGM technology is also integrating AI. For example, Roche recently introduced new predictive AI-powered CGM technology (Accu-Chek SmartGuide). During the unveiling, Chief Medical Officer Julien Boisdron of Roche Diabetes Care referred to it as “a solution more than a CGM.” He described how the solution, which consists of two programs and a sensor, aids in both data visualization and prediction.
A new era of possibility has dawned in diabetes management and its associated complications. These novel techniques present significant opportunities for treating the combined problems associated with diabetes and obesity. A class of drugs called glucagon-like peptide-1 (GLP-1) agonists is used to treat obesity and type 2 diabetic mellitus (T2DM). As mentioned in our article, “10 Best GLP-1 and Weight Loss Stocks to Buy Now,” by 2030, the GLP-1 market, driven equally by obesity and diabetes, is expected to reach $100 billion. Thirty million GLP-1 users, or around 9% of the US population, may be on the medication by 2030.
The latest KFF Health Tracking survey indicates that 12% of American adults claim to have used a GLP-1 medicine at some point. Over the last half-decade, patients with diabetes now account for 43% of GLP-1 prescription users, while 22% of patients with obesity or overweight diagnoses also take the treatment. Adults who have heard “a little” or “a lot” about these drugs have gone from 70% to 82% over the past year, while those who have heard “a lot” or “a lot” about them have increased from 19% to 32%.
However, there are now difficulties as a result of the increased demand for these diabetes and weight reduction medications. A potential “explosion in the unlicensed sale of medication online” was indicated by the National Pharmacy Association (NPA). Semaglutides under the brand name Ozempic help individuals with type 2 diabetes control their blood sugar levels, but in some countries, such as the US under the brand name Wegovy, they are also widely used to help patients lose weight.
NPA chairman Nick Kaye stated:
“Pharmacists remain deeply concerned that the current medicine shortages crisis could lead to an explosion in the unlicensed sale of medication online.”
Methodology:
We sifted through holdings of ETFs exposed to the diabetes care industry and financial media to form an initial list of 20 diabetes stocks. Then we selected the 7 stocks that had the highest upside potential and market caps above $2 billion. The stocks are ranked in ascending order of the upside potential.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
A close-up of a person’s hand holding a bottle of pharmaceuticals.
Merck & Co., Inc. (NYSE:MRK)
Analysts’ Upside Potential: 17.84%
Merck & Co., Inc. (NYSE:MRK) is a global provider of healthcare services. It is divided into two business segments: animal health and pharmaceuticals. Since the FDA approved Januvia in 2006, the type 2 diabetes medication has brought in $50 billion for Merck through 2023.
The combined sales of the diabetic medications Januvia and Janumet, which are similar, were over $75 billion in 2023, but the revenue is falling. Diabetes sales have significantly decreased in Q2 2024 YoY, dropping by 24.82%. Lower prices and demand in the United States, along with continued generic competition in many overseas markets, especially in Europe and the Asia Pacific regions, are the main causes of the drop in sales.
At this point, at least, the focus of efinopegdutide’s Phase 2 research is non-alcoholic steatohepatitis (NASH) rather than diabetes. As an oral medication, Merck may have an advantage over injectable drugs from Lilly and Novo. Dean Li, Merck’s president of research, states that the drug has shown a “significant reduction in liver fat and also gives a weight loss of 10% to 12%”. This medicine has the potential to become a diabetic drug blockbuster as well if approved.
The promising pipeline and high analyst opinion support Merck & Co., Inc. (NYSE:MRK) as a solid investment opportunity. Leerink Partners’ Daina Graybosch upholds a Buy recommendation. Merck’s pipeline shows great potential, especially in the small cell lung cancer (SCLC) segment, despite recent difficulties with TIGIT studies and the fixed-dose combo strategy for Keytruda. Important advancements include MK-6070 and ifinatamab deruxtecan, which should facilitate quicker approval procedures and aid in the expansion of the company’s operations.
In an effort to safeguard a portion of Keytruda sales from potential erosion by biosimilars, the subcutaneous formulation of Keytruda is viewed as a crucial life-cycle management tactic. This strategy, together with focused attention on unique assets within the TIGIT market, shows Merck’s strategic insight in preserving its competitive advantage in immuno-oncology.
In line with this view, Jefferies has assigned a Buy rating with a $150.00 price target, indicating even more confidence in Merck’s long-term prospects.
However, Merck’s stock has dropped 8.69% from $125.45 to $114.55 in the last six months, suggesting investor uncertainty about the company’s near-term prospects. This drop illustrates the possible dangers of Merck’s reliance on Keytruda, especially in light of growing competition and threats from biosimilars.
Carillon Eagle Growth & Income Fund stated the following regarding Merck & Co., Inc. (NYSE:MRK) in its first quarter 2024 investor letter:
“After posting lackluster returns in 2023, Merck & Co., Inc. (NYSE:MRK) got off to a strong start in January by raising the long-term sales forecasts for its oncology and cardiology pipelines and reporting solid fourth-quarter results, coupled with strong financial guidance for 2024. Merck shares also finished the quarter strong after receiving U.S. Food and Drug Administration approval in late March for a new cardiology medicine with the potential to contribute significantly to sales growth over the next several years.”
Despite difficulties in the diabetes segment, Merck & Company (NYSE:MRK) has promising growth potential due to its oncology pipeline. Analysts are bullish on the stock. The average target price set by 12 analysts is $134.58, which is a 17.84% increase from the current stock price of $114.21.
Overall MRK ranks 6th on our list of the best diabetes stocks to buy. While we acknowledge the potential of MRK as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MRK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.