[Updated: Oct 4, 2021] Merck acquires Acceleron
Merck (NYSE: MRK) Yesterday, it announced that it would acquire Acceleron Pharma, a biopharmacy company focused on rare diseases, for $ 11.5 billion in cash and debt. Acceleron has multiple potentially blockbuster drugs in its pipeline. To name a few, Sotatercept is in late-stage clinical trials for the treatment of pulmonary arterial hypertension and is estimated to have peak sales of over $ 2 billion. Lebrozil, a partnership with Bristol Myers Squibb, another drug used to treat anemia in myelodysplastic syndrome, is estimated to have peak sales of more than $ 2 billion.
Currently, MRK inventories have been squeezed recently as sales of some medicines are sluggish and they rely heavily on a single drug, Keytruda, for revenue growth. The acquisition of Acceleron is seen as a plus for Merck as it strengthens its cardiovascular portfolio and provides the company with several potential blockbuster drugs. The $ 180 per share price paid by Merck is still on the line with a premium of 34% above the $ 134 level where Acceleron shares were traded a few weeks ago. Overall, the deal could eliminate some of Merck’s growth trajectory concerns and increase multiples of future deals.
We continue to believe that MRK stocks are undervalued and Merck Rating Based on the adjusted EPS forecast of $ 5.65 and a P / E multiple of about 16 times 2021, it is $ 91 per share, which could be more than 20% higher than the current $ 75.
[Updated: Sep 21, 2021] Merck shares are undervalued
Stock price Merck (NYSE: MRK) In September 2020, it reached a 52-week high of about $ 82. Since then, it has been in the range of $ 70-80 for most of last year and is currently trading at around $ 72. We believe MRK stocks are undervalued at current levels and investors can take advantage of the recent decline as a buying opportunity for long-term profits. MRK inventories have fallen by more than 15% last year or so, despite a 6% increase in revenue over the same period. Over a longer period, MRK stocks have risen just 28% from the $ 56 level seen at the end of 2017, and the S & P 500 has risen 63%, well below the broader market. Merck’s earnings growth was partially offset by a decline in P / E multiples, resulting in a slower rise in stock prices.
Looking at fundamentals, Merck’s total revenue increased 21% over the past 12 months to $ 48.5 billion, compared to $ 40.1 billion in 2017. The increase in revenue could be primarily due to the increased market share of its blockbuster drug Keytruda. Approved as multiple types of cancer treatments. Merck’s net income has more than doubled since 2017 to $ 5.6 billion, both due to increased revenue and increased margins. The company has also repurchased more shares in recent years, reducing the total number of issued shares since the end of 2017 by 7%. As a result, Merck’s earnings per share surged 150% over the past 12 months to $ 2.20. Compared to $ 0.88 in 2017. Despite the significant growth in EPS in recent years, Merck’s price-earnings ratio has now shrunk from 49% to 33 times compared to the 64x level seen in 2017, and the multiple will increase in the future. I think there is a high possibility of doing so. Year. Our dashboard, Afraid to buy Merck stock There is a base number.
For Merck, much of its revenue growth in recent years has been driven by the oncology drug Keytruda, which doubled from $ 7.1 billion in 2017 to $ 14.4 billion in 2020. However, the Covid-19 pandemic did have some impact on sales growth. Due to low visits and low Gardasil and Proquad vaccination rates, this trend reversed in the second quarter, with Gardasil sales skyrocketing 88%. There is concern that sales of Januvia and Janumet, whose patents are about to expire, will slow down. However, Merck is also growing steadily in other areas, such as the Animal Health business and the revenues of the Rinparaza and Lenvima Alliance. Pet ownership increased during the pandemic, which increased demand for veterinary drugs in general, including those offered by Merck.
Merck’s Keytruda continues to gain market share as it is approved for multiple indications, including lung, head and neck, bladder, kidney and skin cancers. I have. Keytruda’s patents are protected for another seven years, with annual sales of more than $ 25 billion by 2026. The recent spin-off of women’s health, legacy brands and biosimilar businesses has allowed Merck to focus on more profitable medicines. It means improving the margin in the future.
Overall, Merck expects more positives than the pessimism surrounding slowing sales growth for some medicines.Go by us Merck RatingThe adjusted EPS estimate is $ 5.65 and the P / E multiple is 2021, which is equivalent to $ 91, which is more than 26% above the current market price of about $ 72.
MRK’s share price can be higher, but in 2020 there will be many price discontinuities that can offer attractive trading opportunities. For example, you’ll be surprised at how counterintuitive the valuation of stock prices is. Freeport vs UnitedHealth
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