In premarket trading on Mar. 8, Merck stock was up by 0.8 percent at $73.73. The stock rose after the company announced promising preliminary data from a Phase 2a study on molnupiravir, a COVID-19 drug. However, the stock is down about 11 percent year-to-date. What’s the forecast for MRK stock in 2021? Should investors buy the stock?
Merck, a multinational biopharmaceutical company, focuses on oncology, vaccines, immunology, neurosciences, cardiovascular, diabetes, and animal health. The New Jersey–based company was founded in 1891.
Merck's partnership with Ridgeback Biotherapeutics
On Mar. 6, Merck and partner Ridgeback Biotherapeutics posted preliminary data from a Phase 2a trial testing an experimental COVID-19 oral antiviral drug, molnupiravir. The trial enrolled non-hospitalized adults who had an early COVID-19 infection. The results showed that, at day 5, there was a quicker reduction in infectious virus among patients who received molnupiravir compared with those who received a placebo. No safety concerns have been identified in the ongoing clinical trial.
Molnupiravir is now being tested in a Phase 2/3 trial, which is expected to be completed in May. In Jan. 2021, Merck said that it had discontinued developing two COVID-19 vaccines of its own after the results of early-stage studies weren't promising.
Could molnupiravir be a gamechanger for Merck?
Molnupiravir could be key in the fight against COVID-19, as it can block virus transmission within 24 hours. The drug is taken orally, in capsule or tablet form. No drug to cure coronavirus has been developed yet. Whereas remdesivir had emerged as something like a miracle drug, experts now believe it's not as effective as once believed.
Merck’s stock forecast
According to TipRanks, analysts' average target price for Merck is $93.50, which is 27.9 percent above its current price. Of the four analysts tracking Merck, three recommend “buy” and one recommends “hold.” None of the analysts recommend “sell.” Their highest target of $105 is 12.3 percent above the stock's current price, while their lowest of $79 is 15.5 percent below.
Merck looks like a good stock to buy
Merck's NTM (next-12-month) EV-to-sales multiple of 4.0x looks attractive in the pharmaceutical space. In comparison, Johnson & Johnson and Eli Lilly have NTM EV-to-sales multiples of 4.6x and 7.2x, respectively.
Merck’s drug, Keytruda, is approved to treat several types of cancer. In 2020, the company’s sales grew by just 2 percent year-over-year to $48 billion, but its Keytruda sales grew 30 percent to 14.4 billion. And the cancer medicine still has a very promising outlook: research analytics firm EvaluatePharma forecasts that Keytruda will be one of the bestselling drugs globally by 2024. Merck is working on several other programs as well, with 22 therapies in phase 3 trials and 38 in phase 2 trials.