Failure Of This Merck Study Is A 'Material Risk' But Analysts Are 'Extremely Bullish'

Merck & Co. Inc. (NYSE: MRK) seems well positioned to surpass 2023 consensus estimates, driven by margin potential, according to Guggenheim.

The Analyst: Seamus Fernandez upgraded the rating for Merck from Neutral to Buy, while establishing a price target of $104.

The Thesis: The company’s margins are likely to be driven in 2023 by the Januvia patent win and positive trajectory for Keytruda and Gardasil, Fernandez said in the upgrade note.

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“We believe there is potential upside to sotatercept if the STELLAR trial succeeds this quarter; failure of STELLAR is a material risk (potential downside of 5-10%), but our KOLs remain extremely bullish and the recently published OLE supports the case for efficacy on the 6MWT endpoint,” the analyst wrote.

Post-STELLAR, we expect investor focus to shift to MRK’s oral PCSK9, given that management confirmed it can now produce the drug at global scale with a highly competitive cost structure, representing a $5-10B opportunity as a first-in-class oral treatment option for a validated MoA,” he added.

MRK Price Action: Shares of Merck climbed 2.60% to $89.88 in premarket trading on Monday.