November 12, 2021 8:00 AM
 — 
3
 min

Good reporting and strong driver ahead

buy

At the end of October, Merck released strong 3Q results. The company's revenue increased by 20.4% yoy in the last quarter, reaching $ 13.15 billion, which turned out to be better than the consensus forecast of $ 12.32 billion. Net profit in July-September grew by 55.4% yoy and amounted to $ 4.57 billion, or $ 1.80 per share, up from $ 2.94 billion, or $ 1.16 per share, in the same period a year earlier. Excluding one-off factors, earnings per share rose to $ 1.75 from $ 1.37, also beating market expectations of $ 1.55. The company's management has improved its forecast for adjusted earnings per share for 2021 to $ 5.65-5.60 from $ 5.47-5.57. Revenue is expected to be $ 47.4-47.9 billion. The market expects these figures to be $ 5.63 and $ 47.60 billion, respectively.

TIKR:
MRK

PRICE:
$84

TARGET PRICE:
$95

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In the first half of October, Merck announced that it had submitted a request to the FDA for an emergency use of its COVID-19 drug. The company said that an interim analysis of the third phase of clinical trials of the drug showed that molnupiravir reduced the risk of hospitalization and death by 50% in patients with mild to moderate symptoms of COVID-19. In the event that the use of the drug is approved by the FDA, it will become the first cure for COVID-19 in capsules. Merck's application to the FDA will be reviewed by a panel of independent experts on November 30, after which the regulator will make a decision. under the contract, the government has the right to buy another 2 million doses.

If successful, Merck will be able to start selling the already produced 10 million treatment courses and enter into new contracts for the supply of the drug. Since the beginning of July, the US government has acquired 3.1 million treatment doses for a total of $ 2.2 billion. On November 8, Pfizer announced the creation of paxloid, a competitor drug that treats coronavirus. The news had a negative effect on Merck shares, which fell 10%. Since then, the securities have managed to recover only marginally. We believe the news was overvalued by bidders as the emerging market for the treatment of coronavirus infection with capsules has high capacity and potential. Currently, all other US-certified anti-Covid drugs are administered intravenously. We maintain our target price for Merck shares at $ 95 and plan to revise our target if molnupiravir is approved.

Merck is a global health care company that includes prescription medicines, vaccines,biologic therapies, and animal health. It has a strong product presence in the oncology,cardiovascular, CNS, anti-infective, anti-inflammatory, and diabetes areas, among others. Itsanimal health division focuses mainly on feed animals.

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