Jefferies has raised its target price for Merck shares from $138 to $141, while maintaining its buy recommendation on them, after it announced the acquisition of Verona for approximately $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 a loss of exclusivity in 2031 and the 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, the note concludes.


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