Meanwhile, Lambrolizumab, Merck’s cancer drug, has received ‘breakthrough’ therapy status from the FDA for the treatment of advanced melanoma. Advanced melanoma accounts for more than 80% of skin cancer-related deaths and 1%-2% of all cancer deaths in the U.S. alone. The breakthrough status will allow the company to expedite the development of this drug.
Another important drug in Merck & Co., Inc. (NYSE:MRK)’s pipeline is Vintafolide, which is a therapy for ovarian cancer and is already under review by European regulators. Its cholesterol drug Vytorin, was recently deemed safe enough to continue a trial.
Valuation
Let us compare Merck’s prospects with that of its peers, Pfizer Inc. (NYSE:PFE) and Novartis AG (ADR) (NYSE:NVS).
Last year, Novartis AG (ADR) (NYSE:NVS) toppled Pfizer Inc. (NYSE:PFE) from its position as the leading global drug marker and is currently best placed among the three. Analysts predict 1.3% revenue growth to $57.4 billion this year. There is also a lot of excitement over its announcement that it has met all objectives in a clinical study for a psoriasis treatment.
Meanwhile, Pfizer is the hardest hit with patents expiring for some of its best selling drugs. The cholesterol fighting drug, Lipitor, which once generated $13.5 billion in annual sales, brought in only $626 million in the first quarter. The patent for this drug expired in 2011. And in June, the UK patent expired for another bestseller, Viagra. Analysts’ expect Pfizer Inc. (NYSE:PFE)’s total sales to fall by 11.9% to $52 billion this year.
Analysts’ expect Merck & Co., Inc. (NYSE:MRK) to report a modest 4% revenue slippage this year to $45 billion and get to around $45.5 billion level in 2014. This compares with the $47 billion sales that the company saw in 2012.
While, Novartis AG (ADR) (NYSE:NVS) is the best placed among the three it is also the most expensive with a forward price-to-earnings ratio of 13.17. Pfizer Inc. (NYSE:PFE) is the cheapest with forward price-to-earnings ratio of 12.12, but is facing too many uncertainties.
Merck, with its forward price-to-earnings ratio of 12.73 is a good alternative and can see reasonable upsides over the coming months. Moreover, the additional $15 billion share repurchases that the board approved and the solid 3.6% dividend yield are good extra incentives for owning the stock.
Last word
No doubt, Merck & Co., Inc. (NYSE:MRK) is facing challenges, but it still has good prospects in the form of increasing presence in emerging markets and a strong pipeline. A pickup in the sales of Januvia and Janumet drugs in the U.S. can help it meet analyst estimates. Given its valuation and considering the upsides that are possible, investors can definitely remain upbeat about the stock.
The article This Pharmaceutical Company Is Poised for Wellness originally appeared on Fool.com.
Eshna De has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Eshna is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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