Jefferies has raised its target price for Merck shares from $138 to $141, while maintaining its buy recommendation on them, following the announcement of the acquisition of Verona for about $10bn.
The broker believes that this transaction creates value for Merck, with a positive impact on valuation estimated at approximately $3 per share. The broker highlights that this acquisition also allows Merck to diversify its revenues in light of the short-term expiry of Keytruda patents.
Even in our pessimistic scenario ('bear case'), we see the transaction creating value (positive NPV) of $2 per share, with loss of exclusivity in 2031 and immediate entry of generics, the analyst said.
Our base case scenario assumes a positive impact of $3 per share, assuming loss of exclusivity in 2035 and a rapid launch in COPD generating approximately $3.4bn in risk-adjusted sales for Ohtuvayre from 2030, he concludes.
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Merck & Co., Inc. specializes in the development, production, and marketing of therapeutic products and vaccines sold under prescription. Net sales break down by activity as follows:
- sale of pharmaceutical products (73.9%): for treating hypertension, osteoporosis, atherosclerosis, respiratory, bacterial and fungal, ophthalmologic, and urological diseases, acute migraine, hair loss in men, etc.;
- sale of vaccines (15.5%);
- sale of animal health products (9.8%);
- other (0.8%).
Net sales are distributed geographically as follows: the United States (56.2%), Europe/Middle East/Africa (22.4%), Latin America (5.2%), Asia/Pacific (4.6%), Japan (4.2%), China (3%) and other (4.4%).
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