UBS maintains Merck stock Buy rating, $105 price target

On Thursday, UBS analysts maintained a Buy rating on Merck (NSE:PROR) & Co. Inc. (NYSE:MRK) with a steady price target of $105.00. The firm’s analysis highlighted concerns over the current market sentiment towards Merck, influenced by factors such as the performance of its Gardasil vaccine and upcoming developments. Despite a promotional push in China’s Jiangsu region and substantial shipments to the country in January, UBS anticipates that consensus estimates for Gardasil’s sales may be overly optimistic.

According to UBS, there is a mismatch between their estimated Gardasil sales for the first quarter at $1.3 billion and the consensus of $1.4 billion. This discrepancy extends to the full-year projections, with UBS estimating $6.1 billion against a consensus of $6.7 billion. Despite these concerns, Merck maintains strong fundamentals with a healthy gross profit margin of 77% and an impressive EBITDA of $29.1 billion over the last twelve months. The analysis pointed to elevated inventory levels in China and limited batch approvals as contributing factors to the potential overestimation of Gardasil sales.

Merck’s Keytruda, an oncology therapy, is expected to continue its growth trajectory, with UBS’s first-quarter estimate aligning with the consensus at $7.4 billion. The launch of two other Merck products, Winrevair and Capvaxive, was also discussed, with UBS predicting sales of $250 million and $100 million, respectively, for the first quarter. These figures slightly differ from the consensus, particularly for Capvaxive, where UBS’s estimate is notably lower.

UBS anticipates that the first-quarter financial report for Merck may present a higher risk of negative reactions due to the current low sentiment towards the company and the broader sector. The firm also highlighted the importance of upcoming events for Merck, including a reassessment of Gardasil demand in China around mid-2025 and the Phase 3 CORALreef Lipids study results for enlicitide decanoate, an oral PCSK9 inhibitor for hypercholesterolemia, expected in the second half of the year. These events are considered potential key inflection points that could influence investor interest in Merck stock. Worth noting is Merck’s strong dividend profile, having maintained payments for 55 consecutive years with a current yield of 3.74%. For deeper insights into Merck’s valuation and 12 additional exclusive ProTips, visit InvestingPro, where you’ll find comprehensive analysis in our Pro Research Report.

In other recent news, Merck has reported promising results from the Phase 3 ZENITH trial of WINREVAIR™ for pulmonary arterial hypertension (PAH). The trial demonstrated a significant 76% reduction in the risk of major morbidity and mortality events compared to a placebo. The study was stopped early due to its overwhelming efficacy, and patients were offered WINREVAIR in an open-label extension study. In another development, Merck’s subcutaneous formulation of pembrolizumab showed potential in a Phase 3 trial for metastatic non-small cell lung cancer. The subcutaneous method was found to be as effective as the intravenous form, with the added benefit of reducing treatment time by nearly 50%. Additionally, the European Commission has approved Merck’s Capvaxive vaccine for adults, expanding its use for preventing pneumococcal disease in Europe. This approval follows previous authorizations in the United States, Canada, and Australia. Meanwhile, several unnamed pharmaceutical companies have expedited shipments of medicines to the U.S. due to potential tariff threats from President Trump. This precautionary measure aims to avoid disruptions from the expected tariffs on European-manufactured products.

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