UBS reiterates Buy rating on Merck stock amid depressed sentiment

Investing.com - UBS maintained its Buy rating and $105.00 price target on Merck (NYSE:MRK), currently trading at $82.13 with a market capitalization of $206.6 billion, despite acknowledging depressed investor sentiment surrounding the pharmaceutical giant. According to InvestingPro analysis, Merck appears undervalued based on its Fair Value estimates, with the stock maintaining an impressive 77% gross profit margin and offering a 3.96% dividend yield.

UBS analyst Trung Huynh noted that Gardasil remains Merck’s key driver, but investors show limited near-term interest in the stock ahead of potential inflection points, including the return of Gardasil China shipments to growth (likely in 2026) and the full Phase 3 oral PCSK9 CORALreef Lipids readout in hypercholesterolemia expected later this year. InvestingPro data reveals the company maintains a GREAT financial health score, with strong cash flows and consistent dividend payments for 55 consecutive years.

For Gardasil specifically, UBS believes inventory levels in China remain elevated, citing expanded promotional efforts now spanning five regions compared to just one previously, along with limited batch approvals in 2025 year-to-date. Despite $200 million in shipments to China in January, UBS does not expect additional shipments this year, projecting annual Gardasil sales of $5.8 billion versus consensus estimates of $6.0 billion.

The competitive landscape has also shifted with Chinese competitor Wantai’s 9-valent HPV vaccine Cecolin 9 now officially approved in China, potentially impacting Merck’s market position.

For Q2 2025, UBS forecasts are broadly aligned with consensus, highlighting continued growth of cancer drug Keytruda (UBS estimate:$7.9 billion vs. consensus: $7.8 billion) and launch uptake of Winrevair (UBS estimate:$321 million vs. consensus: $292 million) as key factors, though the firm warns of potential downside risk if Merck misses expectations amid low sector sentiment.

In other recent news, Merck has reported significant developments regarding its PAH drug, WINREVAIR. The Phase 3 HYPERION study showed a notable reduction in clinical worsening events for patients with pulmonary arterial hypertension, meeting its primary endpoint. This follows the promising results from the ZENITH trial, which demonstrated a 76% reduction in risk for severe outcomes such as death and hospitalization. These findings have prompted Merck to engage with regulators about updating the WINREVAIR label, incorporating data from both trials. Additionally, the U.S. Food and Drug Administration has granted priority review for Merck’s application to update the WINREVAIR label, with a target action date set for October 2025.

Furthermore, Merck’s Enflonsia vaccine has received a significant endorsement from the Advisory Committee on Immunization Practices (ACIP), which could potentially expand Merck’s vaccine market. TD Cowen has maintained a hold rating on Merck, indicating a neutral stance despite the positive vaccine developments. The ACIP has also recommended Enflonsia for inclusion in the Vaccines for Children Program, enhancing access for infants during RSV season. These recent updates reflect Merck’s ongoing efforts to expand its pharmaceutical and vaccine portfolio.

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