Merck and Co Inc (MRK)

[DewDiligence]

Barron’s like MRK—for both valuation and COVID-19 opportunity:

https://www.barrons.com/articles/merck-big-pharmas-quiet-giant-looks-like-a-buy-51597434050

Merck speaks softly and carries a big stick,” says David Risinger, a drug analyst at Morgan Stanley. “It’s not promotional, but it has extraordinary science and compelling assets.”

The drugmaker trades for 15 times projected 2020 earnings—in the middle of the pack of its peers and cheaper than the overall stock market—and yields a healthy 3%. When it reported second-quarter results in July, Merck raised its 2020 guidance for adjusted earnings by about 8%, to a range of $5.63 to $5.78 a share (#msg-157281628).

In coming years, earnings growth at Merck’s core business could average more than 10%, according to Terence Flynn at Goldman Sachs. That would reflect the impact of next year’s planned spinoff of its women’s health unit and some off-patent drugs into a new company called Organon (#msg-153661332).

…Excitement over potential Covid-19 vaccines has lifted the shares of Pfizer (PFE), Moderna (MRNA), and others, but has passed Merck by. Unlike Pfizer and Moderna, which are using novel vaccine technology that will require two doses, Merck is using established technology to develop two Covid vaccines that are designed to work with a single dose. These could give Merck an edge. And one could be available in an oral form, making it easier to administer.

Merck’s vaccine business is led by Gardasil, which protects against cervical and other cancers related to the human papillomavirus. Gardasil may generate nearly $3.9 billion in sales this year and $5.5 billion in 2023. …Merck’s vaccine business, which might generate $9 billion in sales in 2021, could be worth $100 billion. Vaccines are a durable business, largely immune from generic competition, and garner some of the highest valuations in the drug industry.

The article doesn’t even mention MRK’s red-hot animal-health business, which will remain with the parent company rather than going to Organon.