Citi maintains Merck stock Buy rating, $115 target amid new deal

Published 25/03/2025, 20:22
Citi maintains Merck stock Buy rating, $115 target amid new deal

Tuesday, Merck (NSE:PROR) & Co Inc (NYSE: MRK) shares maintained a Buy rating and a $115.00 price target from Citi, following the announcement of a new licensing agreement. The deal with Jiangsu Hengrui Pharmaceuticals grants Merck exclusive rights to develop and commercialize HRS-5346, a phase 2 oral small molecule Lp(a) inhibitor, aimed at treating cardiovascular disease.

Citi analysts expressed optimism about the potential market for treatments targeting elevated Lp(a), a condition affecting approximately one in five adults worldwide. They noted that while HRS-5346 is still undergoing phase 2 trials in China, competitors like Amgen (NASDAQ:AMGN)’s olpasiran and Lilly’s lepodisiran are already advancing to phase 3. With robust annual revenue of $64.2 billion and an impressive gross margin of 77%, Merck demonstrates the financial strength to compete effectively in this space. Despite the competition, Citi believes that Merck’s addition of HRS-5346 significantly enhances its cardio-metabolic pipeline.

The exclusive license agreement is seen as a strategic move by Merck to diversify its portfolio. Elevated levels of lipoprotein(a), or Lp(a), have been linked to an increased risk of cardiovascular diseases, which makes the development of effective inhibitors a substantial market opportunity.

Merck’s commitment to expanding its cardio-metabolic pipeline with HRS-5346 is part of its broader strategy to address a wide range of medical needs. The company’s strong financial health score of "GREAT" on InvestingPro and attractive P/E ratio of 12.9 support the analysts’ positive outlook. The Citi analysts reaffirmed their confidence in the pharmaceutical company’s direction, evidenced by the reiterated Buy rating and maintained price target. According to InvestingPro’s Fair Value analysis, the stock appears undervalued at current levels.

Investors and market watchers will be keeping a close eye on the progress of HRS-5346 through its clinical trials, as well as any potential impacts on Merck’s stock performance and market position in the cardiovascular treatment landscape. For deeper insights into Merck’s financial health and growth prospects, including 10 additional ProTips and comprehensive valuation metrics, explore the detailed Pro Research Report available on InvestingPro.

In other recent news, Merck & Co. reported its financial results for 2024, showing a modest 0.8% increase in net sales to €21.16 billion and a significant 21.2% rise in operating cash flow to €4.59 billion. The company’s oncology portfolio continued to perform well, contributing to the overall revenue growth. Additionally, Merck entered into an exclusive licensing agreement with Jiangsu Hengrui Pharmaceuticals for the global rights to develop and commercialize HRS-5346, an investigational cardiovascular drug, with the exception of Greater China. This deal involves an upfront payment of $200 million to Hengrui Pharma, with potential additional milestone payments. Moody’s Ratings upgraded Merck’s credit rating to Aa3, reflecting confidence in the company’s ability to manage long-term pressures and maintain strong financial metrics. Furthermore, Merck successfully defended itself in litigation concerning its Gardasil vaccine, with a U.S. District Judge dismissing over 200 cases related to alleged side effects. Merck also inaugurated a new $1 billion vaccine manufacturing facility in Durham, North Carolina, as part of its efforts to enhance U.S. manufacturing capabilities. These developments highlight Merck’s ongoing strategic initiatives and financial performance, providing a solid foundation for future growth.

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